2023-12-06 05:39
SYDNEY, Dec 6 (Reuters) - Australia's economy barely grew in the third quarter as exports flagged and households - reeling from a surge in mortgage payments - were reluctant to spend, suggesting rate hikes were working to restrain demand. Marking an eighth straight quarter of growth, albeit its slowest in a year, real gross domestic product (GDP) inched 0.2% higher in July-September from the previous quarter. That was short of forecasts of 0.4% and a result that bolsters the case for the Reserve Bank of Australia to no longer need to tighten. Annual GDP growth stood at 2.1%, little changed from the previous quarter, the data from the Australian Bureau of Statistics showed on Wednesday. "Australia's economy hit the wall in the September quarter," said Andrew Hanlan, an economist at Westpac, adding it was surprising to see just how weak consumer spending was during the quarter. "The intense headwinds of high inflation, sharply higher interest and additional tax obligations are having a significant impact, leading to a sharp decline in real household disposable income." Indeed household spending was flat quarter on quarter and has barely grown for four quarters in a row, its worst stretch since the global financial crisis. Income tax paid jumped 23% from a year ago after the expiry of a tax offset scheme and mortgage payments surged 71% as more people came off fixed-rate mortgages onto higher variable rates. That pushed the household savings ratio to drop further to 1.1%, its lowest level since 2007. The slowdown is seen as a necessary consequence of monetary tightening by the Reserve Bank of Australia so that inflation can be tamed back to its 2-3% target range. Inflation was 4.9% in October. The central bank on Tuesday opted to stand pat to allow more time to assess the impact of a whopping 425 basis points jump in interest rates since May last year. Markets now figure that the RBA doesn't have to hike any further, given the dovish turn from the Federal Reserve and European Central Bank in recent weeks, with aggressive rate cuts priced in for next year. Gareth Aird, head of Australian economics at Commonwealth Bank of Australia, said there was a clear risk that real GDP growth could turn negative in the fourth quarter. He added that he believes rates have peaked and the easing cycle will start in the third quarter next year. "A month ago the risks to our call were skewed towards rate cuts starting at a later date. But the run of both domestic and international data over the past month suggests the risks are now more evenly balanced." Net exports subtracted 0.6 percentage points from gross domestic product as prices for some commodity exports fell. Productivity - in the measure of output per hour worked - increased 0.9% in the quarter after four straight quarters of declines. RBA's forecasts of inflation returning to its 2%-3% target in late 2025 hinge on a pickup in productivity. https://www.reuters.com/markets/australias-economy-slows-crawl-consumer-spending-surprisingly-weak-2023-12-06/
2023-12-06 05:33
A look at the day ahead in European and global markets from Kevin Buckland European stocks are set for a bullish start if they follow the Asia-Pacific lead, buoyed by a drop in bond yields on deepening confidence that the major central banks' tightening cycle has peaked. Japan's Nikkei share average (.N225) jumped 1.8%, as investors piled back in following the benchmark's drop to a three-week low in the previous session. Two of the top three points movers were heavyweight chip industry players Tokyo Electron (8035.T) and Advantest (6857.T). Hong Kong's Hang Seng (.HSI) shook off an early wobble, buoyed by a 1.2% leap in its tech subindex (.HSTECH). An index of mainland blue chips (.CSI300) managed a small gain, after dipping to a nearly five-year trough early in the session amid lingering worries over a Moody's downgrade warning for China's credit rating. Australia's stock benchmark (.AXJO) powered 1.6% higher, still riding the feel-good factor of the Reserve Bank of Australia's rate hike pause. Coupled with recent Federal Reserve dovishness and Tuesday's interview with ECB policy maker Isabel Schnabel, where she told Reuters that further tightening is "rather unlikely", there's a growing sense that the major central banks are done hiking. The Bank of Canada is seen likely to add to that narrative with a "hold" decision later in the day. Benchmark government bond yields have fallen sharply, hitting multi-month lows in Japan, as they tracked the slump in U.S. Treasury yields overnight. But while the U.S. economy is certainly slowing, signs still point to a likely soft landing. The labour market is the key focus for the week, with the ADP employment report later in the day, setting up for Friday's monthly payrolls report. Macro data from Europe's biggest economies is also due soon, with Germany reporting industrial orders and the UK releasing purchasing manager surveys, while the euro area publishes retail sales figures. Key developments that could influence markets on Wednesday: Germany industrial orders (Oct) UK all-sector PMI (Nov) Bank of England financial stability report Euro area retail sales (Oct) U.S. ADP employment (Nov) Bank of Canada rate decision https://www.reuters.com/markets/europe/global-markets-view-europe-2023-12-06/
2023-12-06 05:11
Dec 6 (Reuters) - The London Metal Exchange (LME) is studying a nickel sulphate contract, an exchange official said on Wednesday, as demand for the electric vehicle (EV) battery material rises. "We are continuously conducting market analysis and research. Currently, we are looking at nickel sulphate and welcoming market opinion," Ivy Qi, an official at LME's product development department, said at the Fastmarkets China Battery Raw Materials Conference held in Shanghai. Nickel sulphate is a form of nickel used in EV batteries. Its nickel content is lower than the almost-pure nickel contract, or Class 1 nickel, traded on the LME . With Indonesia rising as the top global producer of nickel products, most of the world supply is in a lower purity form of so-called Class 2 nickel. The LME had said that it stood ready to launch Class 2 contracts should the market desire such products, but it said the feedback from market participants "strongly suggests limited appetite." Abaxx Commodities Exchange, a new Singapore-based commodities exchange owned by Canadian-listed Abaxx Technologies Inc (ABXX.NLB), said in October it aimed to launch the world's first futures contract for nickel sulphate by the year-end. Futures contracts give producers, industrial consumers and investors an easy way to trade products while also allowing hedging of prices to help with financial planning. https://www.reuters.com/markets/commodities/london-metal-exchange-studies-nickel-sulphate-contract-amid-rising-ev-battery-2023-12-06/
2023-12-06 03:55
SINGAPORE, Dec 6 (Reuters) - Ratings agency S&P Global Ratings said on Wednesday there have been no changes in its ratings on China, a day after its peer Moody's downgraded its outlook on the country's credit rating to "negative". "We last affirmed our A+ long term ratings on China in June with stable outlook and there has been no changes to that yet," said S&P in an emailed response to queries from Reuters. The firm currently has an A+ rating for China sovereign with a 'stable' outlook. https://www.reuters.com/world/china/sp-no-changes-china-credit-rating-outlook-2023-12-06/
2023-12-06 03:13
BHUBANESWAR, India, Dec 5 (Reuters) - Cyclone Michaung barrelled into the southern Indian coast on Tuesday with intense winds, its arrival preceded by torrential rains and flooding that killed at least 13 people, as officials assessed the damage. Tall waves crashed into southern coastal towns over the last two days as the cyclone approached, submerging entire villages and halting all transportation as more than 390,000 people felt its impact, authorities said. Michaung made landfall near the beach town of Bapatla in Andhra Pradesh state with winds of up to 70 mph that later dropped slightly as the 'severe' category cyclone weakened, the Indian weather office said. Further weakening is forecast in the next six hours. Trees were uprooted and at least 25 villages inundated as the cyclone traversed northwards and authorities evacuated more than 15,000 people to safety ahead of landfall, the Andhra Pradesh government said. "We have taken all measures and have all the equipment. We have also broadcast precautions to the public yesterday," Zahid Khan, a National Disaster Response Force official, told ANI news agency, adding the force had multiple teams deployed on ground. The 13 people killed include a 4-year-old boy who died after a wall collapsed, authorities said. More than 140 trains and 40 flights were cancelled in the state. Up to eight inches of rain is expected in the state over the next 24 hours, the weather office said. In neighbouring Tamil Nadu state capital Chennai, a major electronics and manufacturing hub, residents waded through waist-deep floodwaters that also swept away cars. The floods triggered memories of similar rains in Chennai eight years ago which killed 290 people, as some activists questioned whether the city's infrastructure could handle extreme weather events. On attempts to improve stormwater drainage systems in the city, Raj Bhagat P, a civil engineer and geo-analytics expert said: "Their solutions would have helped a lot in moderate and heavy rainfall, but not in very heavy and extremely heavy rains." The Chennai airport - one of the busiest in the country - was closed on Monday after a runway was submerged and reopened at 9 a.m. on Tuesday, a spokesperson for the federal civil aviation ministry said. Taiwan's Foxconn (2317.TW) and Pegatron (4938.TW) had halted Apple (AAPL.O) iPhone production at their facilities near Chennai due to the rains on Monday, sources told Reuters. Foxconn resumed operations on Tuesday. https://www.reuters.com/world/india/floods-five-killed-southern-india-braces-cyclone-michaung-2023-12-05/
2023-12-06 03:07
TAIPEI/SINGAPORE, Dec 6 (Reuters) - Taiwan's stock market is soaring ahead of elections next month that will shape relations with China, which claims the island as its own, as investors look past political risk and potential for conflict and bet on success for chipmakers and other exporters. Foreign investors poured a net $7.6 billion into Taiwan equities in November, a record sum according to LSEG data stretching back to the beginning of 2008. Domestic investors were also net buyers to the tune of $300 million. The island's benchmark stock index (.TWII) hit a 20-month high on Monday. Presidential and parliamentary elections on Jan. 13 are happening as China has stepped up its military pressure and denounced leadership frontrunner Lai Ching-te from the ruling Democratic Progressive Party as a dangerous separatist. He says only Taiwan's people can decide their future. The main opposition party, the Kuomintang (KMT) which traditionally favours close ties with China but denies being pro-Beijing, has pledged to re-start engagement should it win. Money managers who have long borne the political risk to own Taiwan's technology-heavy equity market say a surprise KMT victory could make for short-term gains by easing relations with China. They are betting, though, on rebounding profits from chipmaking to power a new leg for a rally that has lifted Taiwan Stock Exchange Weighted Index by 23% this year. "Lai would not be so stupid as to declare independence after Taiwan's protective big brother, the United States, has expressed clear opposition to the idea," said Allen Huang, a senior analyst at Mega International Securities in Taipei. Markets likewise see a conflict as unlikely, even though China has cast the election as a choice between war and peace. The Taiwan dollar , along with China's yuan , has rebounded strongly in recent weeks. Taiwan has lived with the threat of Chinese invasion since the defeated Republic of China government fled to the island after losing a civil war to Mao Zedong's communists in 1949. "We do not think the current Taiwan elections will result in a meaningful escalation in cross-straits tensions," said Gary Tan, a portfolio manager at Allspring Global Investments in Singapore. "We continue to focus on secular growth drivers impacting Taiwan companies such as artificial intelligence," he said, as well as outsourcing of electric vehicle production, manufacturing offshoring and industrial equipment demand. 'OPPORTUNITY TO BUY' Taiwan is a major manufacturer of chips used in everything from smartphones to cars and fighter jets, led by Taiwan Semiconductor Manufacturing Co Ltd (2330.TW) whose Taipei-listed shares dominate the index and have surged 27% this year. The benchmark index is the best performing major market in Asia in U.S. dollar terms and the success has become an election talking point, with President Tsai Ing-wen on Sunday telling a campaign rally this showed "the world's confidence in Taiwan". "The major stocks in Taiwan are not extreme on valuations, they are not as expensive as some of pure AI companies," said Caroline Yu Maurer, head of China and specialised Asia strategies at HSBC Asset Management in Hong Kong. "They are quite well supported by the earnings growth ... a lot of stocks have quite reasonable P/E, if it does correct, it's an opportunity to buy instead of selling everything," she said. Taiwan's stock market trades on a price-to-earnings or PE ratio - one measure of relative value - of 17 compared with 23 for the S&P 500 (.SPX). To be sure, the KMT has retorted that rather than stocks, the number to look at is this year's projected economic growth rate of 1.42%, a 14-year low. Foreign outflows over the four months preceding November suggest some investors were stepping back and others actively negative. In a note last month, research firm Alpine Macro recommended below-benchmark allocation to Taiwan stocks and shorting the currency against higher-yielding South American currencies due to the risk the election could "generate negative surprises". SEMI-REBOUND Fund managers see tourism, biotech and renewables as particularly sensitive to the unexpected outcome of a KMT victory. Wind power and biotechnology enjoy support from the DPP and could be expected to prosper under its leadership. Hotels and travel shares (.THOI) have underperformed the market with a 9% gain this year, and are likely to stay subdued as long as Chinese visitors stay away - something which a KMT victory could change. The KMT, which had signed landmark trade and tourism deals with China when it was in power, wants to revive plans for a controversial service trade agreement that it had abandoned in the face of mass protests almost a decade ago. Ker Chien-ming, the DPP's parliament whip, described that idea earlier this year as like "opening the gates to the enemy". Still, with TSMC beating forecasts last quarter and foreshadowing health growth ahead, longer-term investors say that even politics can't spoil a party built on rebounding demand for its products. "We own predominantly technology names in Taiwan and expect limited impact from the elections," said Sat Duhra, a portfolio manager at Janus Henderson in Singapore. "Drivers for these names are largely outside Taiwan – for example PC and smartphone recovery globally and growth of AI." https://www.reuters.com/markets/asia/despite-china-jitters-taiwan-stocks-soar-investors-buy-before-election-2023-12-06/
