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US

North Korea says U.S. drills have pushed situation to ‘extreme red-line’ -KCNA

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SEOUL, Feb 2 (Reuters) – North Korea’s Foreign Ministry said on Thursday that drills by the United States and its allies have pushed the situation to an “extreme red-line” and threaten to turn the peninsula into a “huge war arsenal and a more critical war zone.”

The statement, carried by state news agency KCNA, said Pyongyang was not interested in dialogue as long as Washington pursues hostile policies.

“The military and political situation on the Korean peninsula and in the region has reached an extreme red-line due to the reckless military confrontational maneuvers and hostile acts of the U.S. and its vassal forces,” an unnamed ministry spokesperson said in the statement.

In Washington, the White House rejected the North Korean statement and reiterated a willingness to meet with North Korean diplomats “at a time and place convenient for them.”

“We have made clear we have no hostile intent toward the DPRK and seek serious and sustained diplomacy to address the full range of issues of concern to both countries and the region,” said a spokesperson for the White House National Security Council.

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The North Korean statement cited a visit to Seoul this week by U.S. Defense Secretary Lloyd Austin. On Tuesday Austin and his South Korean counterpart vowed to expand military drills and deploy more “strategic assets,” such as aircraft carriers and long-range bombers, to counter North Korea’s weapons development and prevent a war.

“This is a vivid expression of the U.S. dangerous scenario which will result in turning the Korean peninsula into a huge war arsenal and a more critical war zone,” the North Korean statement said.

North Korea will respond to any military moves by the United States, and has strong counteraction strategies, including “the most overwhelming nuclear force” if necessary, the statement added.

More than 28,500 American troops are based in South Korea as a legacy of the 1950-1953 Korean War, which ended in an armistice rather than a peace treaty.

“We reject the notion that our joint exercises with partners in the region serve as any sort of provocation. These are routine exercises fully consistent with past practice,” the White House statement said.

Last year, North Korea conducted a record number of ballistic missile tests, which are banned by United Nations Security Council resolutions. It was also observed reopening its shuttered nuclear weapons test site, raising expectations of a nuclear test for the first time since 2017.

In New York, South Korea’s foreign minister, Park Jin, met with the United Nations Secretary-General Antonio Guterres on Wednesday and called for the U.N.’s continued attention to North Korea’s recent provocations and efforts to implement sanctions on the reclusive regime.

Guterres said any resumption of nuclear testing by North Korea would deal a devastating blow to regional and international security, and reaffirmed support to build lasting peace on the Korean peninsula, according to Park’s office.

Park is on a four-day trip to the United States, which will include a meeting with U.S. Secretary of State Antony Blinken in Washington on Friday.

On Wednesday the United States and South Korea carried out a joint air drill with American B-1B heavy bombers and F-22 stealth fighters, as well as F-35 jets from both countries, according to South Korea’s Defense Ministry.

“The combined air drills this time show the U.S.’ will and capabilities to provide strong and credible extended deterrence against North Korea’s nuclear and missile threats,” the Defense Ministry said in a statement.

Reporting by Josh Smith; Additional reporting by Soo-hyang Choi and Steve Holland; Editing by Jonathan Oatis, Bill Berkrot and Gerry Doyle

Our Standards: The Thomson Reuters Trust Principles.

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Business

Shares and bonds nervy as rate-hike week looms

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  • Fed seen hiking 25 bps, ECB and BOE by 50 bps
  • Technology giants lead host of earnings results
  • Shares edge down after robust January rally

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

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World

Hundreds evacuated as blaze erupts in slum next to Seoul’s posh Gangnam district

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SEOUL, Jan 20 (Reuters) – Fire swept through part of a shanty town in the South Korean capital, Seoul, on Friday, destroying 60 homes, many constructed from cardboard and wood, and forcing the evacuation of around 500 people.

Emergency services took five hours to put out the blaze, which erupted before daybreak in Guryong Village, a slum that lies just across a highway from Seoul’s affluent Gangnam district. Officials said no casualties were reported so far.

Home to around 1,000 people, Guryong is one of the last remaining shanty towns in the capital and has become a symbol of inequality in Asia’s fourth largest economy.

Ten helicopters and hundreds of firefighters, police and troops joined the effort to put out the blaze which, according to officials, razed almost one in ten of the 600-plus homes in Guryong.

“I saw a flash from the kitchen and opened the door, and flames were shooting from the houses next door,” said Shin, a 72-year-old woman whose home was completely burned in the inferno.

“So I knocked every door nearby and shouted ‘fire!’ and then called 119,” she said, giving only her surname.

[1/4] Smoke rises from a fire at Guryong village, the last slum in the glitzy Gangnam district, in Seoul, South Korea, January 20, 2023. Yonhap via REUTERS

Kim Doo-chun, 60, said his family was unaffected by the fire but he told Reuters that the village was constantly at risk of disaster due partly to its cardboard homes and narrow alleys.

“If a fire breaks out in this neighbourhood, the entire village could be in danger if we don’t respond quickly. So we’ve been responding together for decades,” said Kim, who has lived in the area for 30 years.

The slum has long been prone to fires and flooding, and safety and health issues abound.

The government had unveiled plans for redevelopment and relocation after a huge fire in late 2014, but those efforts have made little progress amid a decades-long tug of war between landowners, residents and authorities.

The civic authorities for Seoul and Gangnam district, and state-run developers have been at odds over how to compensate private landowners in Guryong and have yet to agree whether residents, most of whom are squatters, are entitled to government support for relocation and housing.

Informed about the fire while in Switzerland for the World Economic Forum, President Yoon Suk-yeol ordered all-out efforts to prevent a bigger disaster, his spokeswoman Kim Eun-hye said.

Seoul Mayor Oh Se-hoon visited the still smouldering village and asked officials to prepare to relocate affected families.

Reporting by Hyonhee Shin; Editing by Christian Schmollinger, Gerry Doyle & Simon Cameron-Moore

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Business

Shares rise, yen climbs as BOJ battles bond bears

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  • 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

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World

China COVID peak to last 2-3 months, hit rural areas next -expert

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  • Peak of COVID wave seen lasting 2-3 months – epidemiologist
  • Elderly in rural areas particularly at risk
  • People mobility indicators tick up, but yet to fully recover

BEIJING, Jan 13 (Reuters) – The peak of China’s COVID-19 wave is expected to last two to three months, and will soon swell over the vast countryside where medical resources are relatively scarce, a top Chinese epidemiologist has said.

Infections are expected to surge in rural areas as hundreds of millions travel to their home towns for the Lunar New Year holidays, which officially start from Jan. 21, known before the pandemic as the world’s largest annual migration of people.

China last month abruptly abandoned the strict anti-virus regime of mass lockdowns that fuelled historic protests across the country in late November, and finally reopened its borders this past Sunday.

The abrupt dismantling of restrictions has unleashed the virus onto China’s 1.4 billion people, more than a third of whom live in regions where infections are already past their peak, according to state media.

But the worst of the outbreak was not yet over, warned Zeng Guang, the former chief epidemiologist at the Chinese Center for Disease Control and Prevention, according to a report published in local media outlet Caixin on Thursday.

“Our priority focus has been on the large cities. It is time to focus on rural areas,” Zeng was quoted as saying.

He said a large number of people in the countryside, where medical facilities are relatively poor, are being left behind, including the elderly, the sick and the disabled.

Authorities have said they were making efforts to improve supplies of antivirals across the country. Merck & Co’s (MRK.N) molnupiravir was made available in China from Friday.

The World Health Organization this week also warned of the risks stemming from holiday travelling.

The UN agency said China was heavily under-reporting deaths from COVID, although it is now providing more information on its outbreak.

“Since the outbreak of the epidemic, China has shared relevant information and data with the international community in an open, transparent and responsible manner,” foreign ministry official Wu Xi told reporters.

Health authorities have been reporting five or fewer deaths a day over the past month, numbers which are inconsistent with the long queues seen at funeral homes and the body bags seen coming out of crowded hospitals.

China has not reported COVID fatalities data since Monday. Officials said in December they planned to issue monthly, rather than daily updates, going forward.

Although international health experts have predicted at least 1 million COVID-related deaths this year, China has reported just over 5,000 since the pandemic began, one of the lowest death rates in the world.

DIPLOMATIC TENSIONS

Concerns over data transparency were among the factors that prompted more than a dozen countries to demand pre-departure COVID tests from travellers arriving from China.

Beijing, which had shut its borders from the rest of the world for three years and still demands all visitors get tested before their trip, objects to the curbs.

Wu said accusations by individual countries were “completely unreasonable, unscientific and unfounded.”

Tensions escalated this week with South Korea and Japan, with China retaliating by suspending short-term visas for their nationals. The two countries also limit flights, test travellers from China on arrival, and quarantine the positive ones.

Japan’s Chief Cabinet Secretary Hirokazu Matsuno said on Friday Tokyo will continue to demand transparency, labelling Beijing’s retaliation as extremely “regrettable.”

Parts of China were returning to normal life.

In the bigger cities in particular, residents are increasingly on the move, pointing to a gradual, though so far slow, rebound in consumption and economic activity.

An immigration official said on Friday 490,000 daily trips on average were made in and out of China since it reopened on Jan. 8, only 26% of the pre-pandemic levels.

Singapore-based Chu Wenhong was among those who finally got reunited with their parents for the first time in three years.

“They both got COVID, and are quite old. I feel quite lucky actually, as it wasn’t too serious for them, but their health is not very good,” she said.

CAUTION

While China’s reopening has given a boost to financial assets globally, policymakers around the world worry it may revive inflationary pressures.

However, December’s trade data released on Friday provided reasons to be cautious about China’s recovery pace.

Jin Chaofeng, whose company exports outdoor rattan furniture, said he has no expansion or hiring plans for 2023.

“With the lifting of COVID curbs, domestic demand is expected to improve but not exports,” he said.

Data next week is expected to show China’s economy grew just 2.8% in 2022, its second-slowest since 1976, the final year of Mao Zedong’s decade-long Cultural Revolution, according to a Reuters poll.

Some analysts say last year’s lockdowns will leave permanent scars on China, including by worsening its already bleak demographic outlook.

Growth is then seen rebounding to 4.9% this year, still well below the pre-pandemic trend.

Additional reporting by the Beijing and Shanghai newsrooms; Writing by Marius Zaharia; Editing by Raju Gopalakrishnan

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Business

Tesla slashes prices in U.S., Europe to drive demand

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  • Tesla cuts prices in U.S., Europe by up to 20%
  • Move follows price cuts across Asia last week
  • Some models now qualify for U.S. tax credits
  • Model 3 price in Germany in line with Volkswagen’s ID.3

Jan 13 (Reuters) – Tesla (TSLA.O) has slashed prices on its electric vehicles in the United States and Europe by as much as 20%, extending a strategy of aggressive discounting after missing Wall Street estimates for 2022 deliveries.

The move, which prompted a 3.8% fall in Tesla’s shares in Frankfurt, came after CEO Elon Musk warned that the prospect of recession and higher interest rates meant it could lower vehicle pricing to sustain volume growth at the expense of profit.

The lower pricing across Tesla’s major markets marks a reversal from the strategy the automaker had pursued through much of 2021 and 2022 when orders for new vehicles exceeded supply. Musk acknowledged last year that prices had become “embarrassingly high” and could hurt demand.

The U.S. price cuts, announced late Thursday in U.S. time on the Model 3 sedan and Model Y crossover SUV, ranged between 6% and 20% compared with prices before the discount, according to Reuters calculations.

That is before an up to $7,500 federal tax credit that took effect for many electric vehicle models at the start of January.

Following is a table of the price cuts by model in Germany and the United States:

Reuters Graphics

Tesla also cut prices for its Model X luxury crossover SUV and Model S sedan in the United States.

In Germany, it cut prices on the Model 3 and the Model Y – its global top-sellers – by between about 1% and almost 17% depending on the configuration. It also cut prices in Austria, Switzerland and France.

For a U.S. buyer of the long-range Model Y, the new Tesla price combined with the U.S. subsidy that took effect this month amounts to a discount of 31%. In addition, the Tesla move broadened the vehicles in its line-up eligible for the Biden administration tax credit.

Before the price cut, the five-seat version of the Model Y had been ineligible for that credit, a designation Musk had called “messed up”. After the price cut, the long-range version of the Model Y will qualify for the $7,500 federal credit.

“This should really boost 2023 (Tesla) volumes,” Gary Black, a Tesla investor who has remained bullish on the company and its prospects through the recent, sharp share price decline, said in a tweet. “It’s the right move.”

Still, some users on Tesla fan forums online complained the price cuts disadvantaged customers who had recently bought their vehicle, leaving them with a lower-valued item on the second-hand car market.

“I’m not very pleased with these huge price sways. Just reducing 10,000 euros like that – definitely makes you feel that you just paid far too much,” one user wrote on a ‘Tesla Drivers and Friends’ forum on Friday.

In China, where Tesla cut prices last week by 6-13.5%, owners protested at delivery centres across the country, pressing Tesla for compensation.

Before the price cut, Tesla inventory in the United States, as tracked by the models its website shows as immediately available, had been trending higher. Prices on used Tesla models had also been declining, increasing the pressure on it to adjust new-car sticker prices.

For 2021, the United States and China combined had accounted for about 75% of Tesla sales, although the automaker has been growing sales in Europe, where its Berlin factory has been ramping up production.

Reuters Graphics

NEW SALES LEADERSHIP

The shift is the first major move by Tesla since appointing its lead executive for China and Asia, Tom Zhu, to oversee U.S. output and sales.

Tesla cut prices in China and other Asian markets last week. Along with previous price cuts announced in October and recent incentives, the Chinese price for a Model 3 or Model Y was down 13% to 24% from September after the recent move, Reuters calculations showed.

Tesla has also cut prices in South Korea, Japan, Australia and Singapore.

Analysts had said the Chinese price cuts would boost demand and increase pressure on its rivals there, including BYD (002594.SZ), to follow suit in what could become a price war in the largest single market for electric vehicles.

That pressure could be building in Europe as well.

Tesla’s Model 3 was the best-selling electric vehicle in Germany last month, followed by the Model Y, beating Volkswagen’s (VOWG_p.DE) all-electric ID.4. Volkswagen recently raised the price of its entry-level ID.3, putting it at parity with the now-discounted Model 3.

Tesla missed Wall Street estimates for fourth quarter deliveries. Full year growth in deliveries was 40% – also short of Musk’s own forecast of 50%.

Tesla shares under pressure

Reporting by Zhang Yan in Shanghai, Hyunjoo Jin in Seoul, Victoria Waldersee in Berlin; Writing by Kevin Krolicki in Singapore; Editing by Lincoln Feast, Kenneth Maxwell, Mark Potter and Alexander Smith

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World

Chinese fret over elderly as WHO warns of holiday COVID surge

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  • Two billion trips expected over Lunar New Year
  • Virus spreading from cities to vulnerable villages
  • WHO says China response challenged by lack of data
  • China’s grand reopening marred by Japan, Korea spat

BEIJING, Jan 12 (Reuters) – People in China worried on Thursday about spreading COVID-19 to aged relatives as they planned returns to their home towns for holidays that the World Health Organization warns could inflame a raging outbreak.

The Lunar New Year holiday, which officially starts on Jan. 21, comes after China last month abandoned a strict anti-virus regime of mass lockdowns that prompted widespread frustration and boiled over into historic protests.

That abrupt U-turn unleashed COVID on a population of 1.4 billion which lacks natural immunity, having been shielded from the virus since it first erupted in late 2019, and includes many elderly who are not fully vaccinated.

The outbreak spreading from China’s mega-cities to rural areas with weaker medical resources is overwhelming some hospitals and crematoriums.

With scant official data from China, the WHO on Wednesday said it would be challenging to manage the virus over a holiday period considered the world’s largest annual migration of people.

Other warnings from top Chinese health experts for people to avoid aged relatives during the holidays shot to the most-read item on China’s Twitter-like Weibo on Thursday.

“This is a very pertinent suggestion, return to the home town … or put the health of the elderly first,” wrote one user. Another user said they did not dare visit their grandmother and would leave gifts for her on the doorstep.

“This is almost the New Year and I’m afraid that she will be lonely,” the user wrote.

More than two billion trips are expected across China over the broader Lunar New Year period, which started on Jan. 7 and runs for 40 days, according to the transport ministry. That is double last year’s trips and 70% of those seen in 2019 before the pandemic emerged in the central Chinese city of Wuhan.

“I will stay at home and avoid going to very crowded places,” said Chen, a 27-year-old documentary filmmaker in Beijing who plans to visit her home town in the eastern province of Zhejiang.

Chen said she would disinfect her hands before meeting elderly relatives, such as her grandmother, who has managed to avoid infection.

LACK OF DATA CRITICISED

The WHO and foreign governments have criticised China for not being forthright about the scale and severity of its outbreak, which has led several countries to impose restrictions on Chinese travellers.

China has been reporting five or fewer deaths a day over the past month, numbers that are inconsistent with the long queues seen at funeral homes. The country did not report COVID deaths data on Tuesday and Wednesday.

Liang Wannian, the head of a COVID expert panel under the national health authority, told reporters that deaths could only be accurately counted after the pandemic was over.

Although international health experts have predicted at least a million COVID-related deaths this year, China has reported just over 5,000 since the pandemic began, a fraction of what other countries have reported as they removed restrictions.

Looking beyond the death toll, investors are betting that China’s reopening will reinvigorate a $17 trillion economy suffering its lowest growth in nearly half a century.

That has lifted Asian stocks to a seven-month peak, strengthened China’s yuan currency against the U.S. dollar and bolstered global oil prices on hopes of fresh demand from the world’s top importer.

China’s growth is likely to rebound to 4.9% in 2023, according to a Reuters poll of economists released on Thursday. GDP likely grew just 2.8% in 2022 as lockdowns weighed on activity and confidence, according to the poll, braking sharply from 8.4% growth in 2021.

TRAVEL CHALLENGES

After three years of isolation from the outside world, China on Sunday dropped quarantine mandates for inbound visitors in a move expected to eventually also stimulate outbound travel.

But concerns about China’s outbreak has prompted more than a dozen countries to demand negative COVID test results from people arriving from China.

Among them, South Korea and Japan have also limited flights and require tests on arrival, with passengers showing up as positive being sent to quarantine.

In a deepening spat between the regional rivals, China has in turn stopped issuing short-term visas and suspended transit visa exemptions for South Korean and Japanese nationals.

Despite Beijing’s lifting of travel curbs, outbound flight bookings from China were at only 15% of pre-pandemic levels in the week after the country announced it would reopen its borders, travel data firm ForwardKeys said on Thursday.

Low airline capacity, high air fares, new pre-flight COVID-19 testing requirements by many countries and a backlog of passport and visa applications pose challenges as the industry looks to recovery, ForwardKeys Vice President Insights Olivier Ponti said in a statement.

Hong Kong Airlines on Thursday said it does not expect to return to capacity until mid-2024.

Reporting by Bernard Orr, Liz Lee, Eduardo Baptista and Jing Wang in Beijing; Writing by John Geddie; Editing by Lincoln Feast and Nick Macfie

Our Standards: The Thomson Reuters Trust Principles.

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Business

Stocks hold on to gains ahead of U.S. inflation test

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  • World stocks inch higher; dollar near 7-month lows
  • Yen gains on report BOJ to scrutinise policy effects
  • Eyes on U.S. CPI due at 1330 GMT
  • Treasuries and euro zone bonds add to gains

MILAN, Jan 12 (Reuters) – World stocks held on to modest gains on Thursday on cautious optimism that U.S. data will confirm inflation is softening, while the yen rose with a report Japan will this month review the side-effects of its ultra-easy policy.

A MSCI gauge of world stocks (.MIWD00000PUS) rose 0.2% to a four-week high by 0831 GMT ahead of core U.S. consumer price inflation, (USCPFY=ECI) which are expected to have slowed to an annual 5.7% in December, from 6% a month earlier. Month-on-month headline inflation is seen at zero (USCPI=ECI).

Bonds held gains, also mirroring hopes of a softer inflation print, and the U.S. dollar was near a seven-month low against a basket of currencies. Europe’s STOXX 600 (.STOXX) equity benchmark index rose 0.4% to its highest since April 2022.

The data due at 1330 GMT is set to have a big impact on markets by shaping expectations of the speed of interest rate hikes in the world’s biggest economy. Markets have priced better-than-even odds that the Federal Reserve raises rates by 25 basis points, rather than 50, at February’s meeting.

“Both the worst and best days for the S&P 500 in 2022 came on days of a CPI release. As such, it’s inevitable that today’s U.S. CPI has the ability to shape the next month,” wrote Deutsche Bank strategist Jim Reid.

“The latest releases have seen two downside surprises on CPI in a row for the first time since the pandemic, which has led to growing hopes that the Fed might achieve a soft landing after all,” he added.

The MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.1% after climbing to a seven-month high, while Japan’s Nikkei (.N225) was steady.

S&P 500 futures were broadly steady following gains for Wall Street indexes on Wednesday. Boston Federal Reserve bank leader Susan Collins told the New York Times that she was leaning towards a 25 basis point hike.

Optimism for a more benign rates outlook and a pickup in demand as China emerges from strict COVID restrictions kept oil prices near one-week peaks.

Brent crude futures topped $83 on Thursday before retreating slightly to trade flat on the day at 82.67 a barrel.

U.S. Treasuries added a little to Wednesday’s gains, sending benchmark 10-year yields down 4.4 basis points (bps) to 3.514%. German 10-year yields , the benchmark for the euro zone, fell 7 bps to 3.509%.

CHINA HOPES

Along with hopes that Western central banks will be gentler, investors are also banking on a recovery in China to help global growth, and are eyeing a potential policy shift in Japan.

The Bank of Japan stunned markets last month by widening the band around its 10-year bond yield target, a move that triggered a sudden rise in yields and a jump in the yen.

On Thursday. Japan’s Yomiuri newspaper reported the BOJ will review the side-effects of Japan’s ultra-easy settings sooner than expected – at next week’s policy meetings – and that it may take additional steps to correct distortions in the yield curve.

The yen rose as much as 0.9% and was last at 131.75 per dollar. Ten-year Japanese government bond futures fell to almost eight-year lows.

Foreign exchange markets elsewhere were holding their breath ahead of the U.S. CPI data while China’s reopening kept a bid under Asia’s currencies. The dollar index added 0.1% to 103.23, not far off a seven-month low of 102.93 hit this week. The yuan traded near five-month highs at 6.7555 per dollar.

China on Thursday reported consumer price falls in December and a larger-than-expected drop in factory gate prices – underscoring weakness in demand – which investors are betting will recover over the coming months.

“It’s not enough for China to come out of COVID to really turn the whole world economy around,” said Steven Wieting, chief investment strategist and chief economist at Citi Global Wealth Investments. “But it really weighs in the opposite direction.”

Reporting by Danilo Masoni in Milan and Tom Westbrook in Singapore

Our Standards: The Thomson Reuters Trust Principles.

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World

China imposes transit curbs for S.Korea, Japan in growing COVID spat

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  • New curbs for S.Korea, Japan nationals transiting China
  • China says visa suspensions for S.Korea, Japan “reasonable”
  • Escalating diplomatic spat may complicate economic relations
  • Social media users lash out at S.Korea’s “insulting” COVID curbs

BEIJING, Jan 11 (Reuters) – China introduced transit curbs for South Korean and Japanese nationals on Wednesday, in an escalating diplomatic spat over COVID-19 curbs that is marring the grand re-opening of the world’s second-largest economy after three years of isolation.

China removed quarantine mandates for inbound travellers on Sunday, one of the last vestiges of the world’s strictest regime of COVID restrictions, which Beijing abruptly began dismantling in early December after historic protests.

But worries over the scale and impact of the outbreak in China, where the virus is spreading unchecked, have prompted more than a dozen countries to demand negative COVID test results from people arriving from China.

Among them, South Korea and Japan have also limited flights and require tests on arrival, with passengers showing up as positive being sent to quarantine. In South Korea, quarantine is at the traveller’s own cost.

In response, the Chinese embassies in Seoul and Tokyo said on Tuesday they had suspended issuing short-term visas for travellers to China, with the foreign ministry slamming the testing requirements as “discriminatory.”

That prompted an official protest from Japan to China, while South Korean foreign minister Park Jin said that Seoul’s decision was based on scientific evidence, not discriminatory and that China’s countermeasures were “deeply regrettable.”

In a sign of escalating tensions on Wednesday, China’s immigration authority suspended its transit visa exemptions for South Koreans and Japanese.

The spat may affect economic relations between the three neighbours as well.

Japanese department store operator Isetan Mitsukoshi Holdings Ltd (3099.T) and supermarket operator Aeon Co (8267.T) said they may have to rethink personnel transfers to China depending on how long the suspension lasts.

“We won’t be able to make short-term business trips, but such trips had dwindled during COVID anyway, so we don’t expect an immediate impact. But if the situation lasts long, there will be an effect,” said a South Korean chip industry source who declined to be identified, as the person was not authorised to speak to media.

China requires negative test results from visitors from all countries.

COUNTING DEATHS

Some of the governments that announced curbs on travellers from China cited concerns over Beijing’s data transparency.

The World Health Organization has said China was underreporting deaths.

China’s health authorities have been reporting five or fewer deaths a day over the past month, numbers that are inconsistent with the long queues seen at funeral homes. In a first, they did not report COVID fatalities data on Tuesday.

China’s Center for Disease Control and Prevention and the National Health Commission did not immediately respond to requests for comment.

Without mentioning whether daily reporting had been discontinued, Liang Wannian, head of a COVID expert panel under the national health authority, told reporters deaths can only be accurately counted after the pandemic is over.

China should ultimately determine death figures by looking at excess mortality, Wang Guiqiang, the head of the infectious diseases department at Peking University First Hospital said at the same news conference.

Although international health experts have predicted at least one million COVID-related deaths this year, China has reported just over 5,000 since the pandemic began, a fraction of what other countries have reported as they reopened.

China says it has been transparent with its data.

State media said the COVID wave was already past its peak in the provinces of Henan, Jiangsu, Zhejiang, Guangdong, Sichuan and Hainan, as well as in the large cities of Beijing and Chongqing – home to more than 500 million people combined.

‘INSULTING’

On Wednesday, Chinese state media devoted extensive coverage of what they called as “discriminatory” border rules in South Korea and Japan.

Nationalist tabloid Global Times defended Beijing’s retaliation as a “direct and reasonable response to protect its own legitimate interests, particularly after some countries are continuing hyping up China’s epidemic situation by putting travel restrictions for political manipulation.”

Chinese social media anger mainly targeted South Korea, whose border measures are the strictest among the countries that announced new rules.

Videos circulating online showed special lanes coordinated by soldiers in uniform for arrivals from China at the airport, with travellers given yellow lanyards with QR codes for processing test results.

One user of China’s Twitter-like Weibo said singling out Chinese travellers was “insulting” and akin to “people treated as criminals and paraded on the streets.”

Annual spending by Chinese tourists abroad reached $250 billion before the pandemic, with South Korea and Japan among the top shopping destinations.

Repeated lockdowns have hammered China’s $17 trillion economy. The World Bank estimated its 2022 growth slumped to 2.7%, its second-slowest pace since the mid-1970s after 2020.

It predicted a rebound to 4.3% for 2023, but that is 0.9 percentage points below its June forecast because of the severity of COVID disruptions and weakening external demand.

($1 = 6.7666 Chinese yuan renminbi)

Additional reporting by Beijing Newsroom; Kaori Kaneko, Mari Shiraki and Elaine Lies in Tokyo; Joyce Lee, Hyunsu Yim and Heekyong Yang in Seoul
Writing by Marius Zaharia; Editing by Gerry Doyle and Kim Coghill

Our Standards: The Thomson Reuters Trust Principles.

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World

China retaliates against South Korea’s COVID curbs, says outbreaks past peaks

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  • China embassy decries “discriminatory” S.Korea border rules
  • Some cities say peak of COVID infections was last month
  • Chinese state media criticise Pfizer over Paxlovid price

BEIJING, Jan 10 (Reuters) – Beijing retaliated on Tuesday against South Korea’s COVID-19 curbs on travellers from China, while state media further downplayed the severity of the outbreak in the last major economy to reopen its borders after three years of isolation.

China ditched mandatory quarantines for arrivals and allowed travel to resume across its border with Hong Kong on Sunday, removing the last major restrictions under the “zero-COVID” regime which it abruptly began dismantling in early December after historic protests against the curbs.

But the virus is spreading unchecked among its 1.4 billion people and worries over the scale and impact of its outbreak have prompted South Korea, the United States and other countries to require negative COVID tests from travellers from China.

Although China imposes similar testing requirements for all arrivals, foreign ministry spokesperson Wang Wenbin told reporters on Tuesday the entry curbs for Chinese travellers were “discriminatory.”

“We will take reciprocal measures,” Wang said, without elaborating.

The Chinese embassy in South Korea has suspended issuing short-term visas for South Korean visitors, it said on Tuesday, the first retaliatory move against nations imposing COVID-19 curbs on travellers from China.

The embassy will adjust the policy subject to the lifting of South Korea’s “discriminatory entry restrictions” against China, it said on its official WeChat account.

Kyodo news agency, quoting multiple travel industry sources, said China has told travel agencies that it has stopped issuing new visas in Japan. An AFP journalist tweeted that the Chinese embassy in Japan released a statement confirming the curbs on Tuesday but removed it from its website within minutes.

With the virus let loose, China has stopped publishing daily infection tallies. It has been reporting five or fewer deaths a day since the policy U-turn, figures that have been disputed by the World Health Organization and are inconsistent with funeral reporting surging demand.

Some governments have raised concerns about Beijing’s data transparency as international experts predict at least 1 million deaths in China this year. Washington has also raised concerns about future potential mutations of the virus.

China dismisses criticism over its data as politically-motivated attempts to smear its “success” in handling the pandemic and said any future mutations are likely to be more infectious but less harmful.

“Since the outbreak, China has had an open and transparent attitude,” the foreign ministry’s Wang said.

PAST THE PEAK

State media downplayed the severity of the outbreak.

An article in Health Times, a publication managed by People’s Daily, the ruling Communist Party’s official newspaper, quoted several officials as saying infections have been declining in the capital Beijing and several Chinese provinces.

Kan Quan, director of the Office of the Henan Provincial Epidemic Prevention and Control, said nearly 90% of people in the central province of 100 million people had been infected as of Jan. 6.

Beijing acting mayor Yin Yong said the capital was also past its peak. Li Pan, from the Municipal Health Commission in the city of Chongqing, said the peak there was reached on Dec. 20.

In the eastern province of Jiangsu, the peak was reached on Dec. 22, while in neighbouring Zheijiang province “the first wave of infections has passed smoothly,” officials said.

Financial markets looked through the latest border curbs as mere inconvenience, with the yuan hitting a nearly five-month high.

Although daily flights in and out of China are still at a tenth of pre-COVID levels, businesses across Asia, from South Korean and Japanese shop owners to Thai tour bus operators and K-pop groups celebrated the prospect of more Chinese tourists.

Chinese shoppers spent $250 billion a year overseas before COVID.

PFIZER CRITICISM

The border rules were not the only COVID conflict brewing in China.

State media lashed out at Pfizer Inc (PFE.N) over the price for its COVID treatment Paxlovid.

“It is not a secret that U.S. capital forces have already accumulated quite a fortune from the world via selling vaccines and drugs, and the U.S. government has been coordinating all along,” nationalist tabloid Global Times said in an editorial.

Pfizer’s Chief Executive Albert Bourla said on Monday the company was in discussions with Chinese authorities about a price for Paxlovid, but not over licensing a generic version in China.

China’s abrupt change of course in COVID policies has caught many hospitals ill-equipped, while smaller cities were left scrambling to secure basic anti-fever drugs.

Yu Weishi, chairman of Youcare Pharmaceutical Group, told Reuters his firm boosted output of its anti-fever drugs five-fold to one million boxes a day in the past month.

Wang Lili, general manager at another pharmaceutical firm, CR Double Crane (600062.SS), told Reuters that intravenous drips were their most in-demand product.

“We are running 24/7,” Wang said.

Reporting by Beijing and Shanghai bureaus; Writing by Marius Zaharia; Editing by Raju Gopalakrishnan

Our Standards: The Thomson Reuters Trust Principles.

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