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Asia tech shares jump; China property stocks rally on Evergrande payment

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October 22, 2021

By Kevin Buckland

TOKYO (Reuters) – Tech stocks climbed in Asia on Friday, following U.S. peers higher, while Chinese property stocks rallied following a surprise interest payment https://www.reuters.com/world/china/china-evergrande-sends-funds-trustee-bond-coupon-due-sept-23-source-2021-10-22 by debt-ridden property developer China Evergrande Group.

Meanwhile, energy stocks dragged following a pullback in oil prices overnight, and as coal futures extended losses after Beijing signalled it would intervene to cool surging prices that contributed to the country’s electricity shortage.

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More broadly, investors have become increasingly concerned that persistent inflation could force central bankers to tighten monetary policy at a point where global economic growth remains fragile.

Regional bond yields rose with those on U.S. Treasuries, where the market priced in higher inflation expectations by narrowing the spread between short- and long-term yields, and pushing breakeven rates to the highest since 2012.

The dollar held gains from overnight – when it rose the most since the start of last week against major peers – as better jobs data boosted the case for a faster tapering of Federal Reserve stimulus and earlier interest rate hikes.

Japan’s Nikkei advanced 0.3%, led by technology shares, while energy and basic materials shares were the biggest drags. The broader Topix ended the day 0.1% higher, with a 0.4% jump in the Topix growth index mostly negated by a 0.2% drop for the value index.

Chinese blue chips gained 0.7%, with the CSI300 Real Estate Index rising 2.1%. Hong Kong’s Hang Seng rose 0.1%, as an index tracking Hong Kong-listed mainland developers rallied 3.4%.

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China Evergrande Group wired funds to a trustee account on Thursday for a dollar bond interest payment due Sept. 23, a source told Reuters on Friday, days before a deadline that would have plunged the embattled developer into formal default. The stock jumped 3.5%.

MSCI’s broadest index of Asia-Pacific shares outside Japan edged up slightly, keeping it on track for a 1.6% gain this week. That would be a third straight winning week, the longest stretch since early June.

Futures pointed to a higher open in Europe, with FTSE futures indicating a 0.3% rise and DAX futures signaling a 0.3% advance.

By contrast, S&P 500 E-minis futures pointed to a 0.1% drop at the re-open, after the cash index posted a record closing high overnight, led by surging tech shares.

The S&P 500 added 0.3%, while the Nasdaq Composite rallied 0.6%, although the Dow Jones Industrial Average edged slightly lower.

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Next week, almost all the so-called FAANG giants report earnings: Facebook, Apple, Amazon, and Google-owner Alphabet. Netflix posted its results on Oct.19, and for the quarter that ended in September, diluted earnings-per-share came in at $3.19, beating analyst expectations of $2.57.

“The narrative over the last couple of days has been earnings focused and tech stocks have led the charge,” said Kyle Rodda, a market analyst at IG Australia.

“There’s momentum there, simple as that.”

At the other end, energy shares were the biggest drag on indexes from Tokyo and Sydney to Hong Kong and Shanghai.

Chinese coal prices continued to dive after the government said it would intervene to cool prices to help electricity producers out of a widespread power crunch.

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Oil prices also fell, with Brent set for its first losing week in seven, and West Texas Intermediate crude down for the first week in nine, following a retreat from multi-year highs reached earlier in the week.

Brent slid 0.7% to $84.03, while WTI dropped 0.6% to $82.03.

“The crude price and energy more broadly has had a pretty good run,” said Chris Weston, head of research at brokerage Pepperstone in Melbourne.

“I don’t think people are giving up on energy necessarily, but I think people are thinking it’s time to switch out of what’s been a very hot sector.”

Meanwhile, yields on benchmark 10-year Treasury notes were at 1.6802%, easing back from a five-month high of 1.7050% reached overnight. Two-year yields at 0.4513% remained close to the overnight high of 0.4560%, a level not seen since March of last year.

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The dollar index, which gauges the greenback against six major rivals, edged higher to 93.755 on Friday, adding to the previous session’s 0.2% gain.

The index bounced off its lowest this month overnight after data showed the number of Americans filing new claims for unemployment benefits dropped to a 19-month low last week, pointing to a tighter labor market.

The Fed has signaled it could start to taper stimulus as soon as next month, with rate hikes following late next year. Full employment is among the Fed’s stated requirements for rates lift-off.

Fed Chair Jerome Powell speaks later on Friday in a panel discussion.

(Editing by Simon Cameron-Moore)

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Arnault-backed group launches second SPAC listing

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December 7, 2021

By Emma-Victoria Farr

LONDON (Reuters) – France’s richest man Bernard Arnault and former UniCredit head Jean Pierre Mustier will publicly list a second blank cheque vehicle in Amsterdam, raising 200 million euros ($226 million), the bookrunners on the deal said.

Earlier this year, the duo raised half a billion euros from their special purpose acquisition company (SPAC), Pegasus Acquisition Company Europe B.V., which is searching for takeover targets in the financial sector.

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On Tuesday, the same group of backers announced they would list a second vehicle with a similar focus, Pegasus Entrepreneurial Acquisition Company Europe, in Amsterdam.

SPACs are listed on a stock exchange by a group of entrepreneurs, who use the money raised to target a private company – allowing the target to get a stock market listing without the arduous process of launching a public listing.

Mustier is working with former Bank of America banker Diego De Giorgi and entrepreneur and investor Pierre Cuilleret in launching the 200 million euro listing.

Several SPACs have listed in Amsterdam, potentially boosting the Dutch financial capital’s credentials as a hub for fast-growing companies. London has only hosted one major SPAC in 2021, after updating its rules to make them easier.

Pegasus is backed by institutional sponsors Tikehau Capital and Financière Agache and by sponsors De Giorgi, Cuilleret and Mustier. Citi, Goldman Sachs and BNP Paribas are the bookrunners on the deal.

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($1 = 0.8860 euros)

(Reporting by Emma-Victoria Farr; editing by John O’Donnell and Louise Heavens)

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Bulls back in charge as Omicron worries wane

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December 7, 2021

By Marc Jones

LONDON (Reuters) – Waning Omicron COVID-19 variant worries and a timely booster shot of Chinese stimulus lifted world stock markets and oil on Tuesday and left traders offloading safe-haven currencies and bonds again.

The FTSEurofirst 300 index was on track for its first back-to-back run of plus 1% gains since February while Asia saw record bounces from some of China’s biggest firms such as Alibaba and Baidu. [.SS][.EU]

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The risk-on mood also helped the dollar climb against safe haven currencies such as the Japanese yen,, which had lost 0.6% overnight, as the confidence-sensitive Australian dollar also found buyers. [FRX/]

Safe-harbour government bonds went the other way with yields – which move inverse to bond prices – up 2.5% on Germany’s benchmark 10-year Bund after falling to a three-month low on Monday. [GVD/EUR]

Reports in South Africa said Omicron cases there had only shown mild symptoms and the top U.S. infectious disease official, Anthony Fauci, told CNN “it does not look like there’s a great degree of severity” so far.

“Good news relating to the severity of Omicron should be taken with a pinch of salt. Faster transmission could offset the benefits of milder symptoms,” researchers at ING said in a note. “More broadly, it is still early days, even if markets are starting to display Omicron fatigue.”

The gains also came after China’s central bank on Monday injected its second shot of stimulus since July by cutting the amount of cash that banks must hold in reserve.

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There was still uncertainty about its property sector as Evergrande teetered on the brink of default again but data showing much stronger import growth was “a positive sign on the strength of domestic demand”, RBC analyst Adam Cole said.

Elsewhere, Australia’s S&P/ASX200 rose 0.95%, while Japan’s Nikkei advanced 2.1% as risk-on sentiment pushed markets higher.

MSCI’s main Asia ex-Japan benchmark has lost about 5% so far this year, with Hong Kong markets figuring among the big losers, while Indian and Taiwan stocks outperformed.

Shares in embattled developer Evergrande edged up 1.7% after hitting a record low on Monday as markets waited to see if the real estate giant has paid $82.5 million with a 30-day grace period coming to an end.

Elsewhere, markets were supported by gains on Wall Street, where economically sensitive stocks outperformed.

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“While epidemiologists have rightly warned against premature conclusions on Omicron, markets arguably surmised that last week’s brutal sell-off ought to have been milder,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, said in a note.

“After all, early assessments of Omicron cases have been declared mild, spurring half-full relief.”

Also supporting the dollar in FX markets was the expectation the Federal Reserve will accelerate the tapering of its bond-buying programme when it meets next week in response to a tightening labour market.

Oil prices jumped another 2% to $74.60 a barrel, adding to a near 5% rebound the day before as concerns about the impact of Omicron on global fuel demand eased. [O/R]

Copper prices also ticked higher while gold was steady at $1,778.5 per ounce on expectations U.S. consumer price data due later this week will show inflation quickening.

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(Additional reporting by Anshuman Daga in Singapore; Editing by Nick Macfie)

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Exclusive: EU antitrust regulator seeks input on Microsoft’s $16 billion Nuance deal

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December 7, 2021

By Paresh Dave

(Reuters) – EU’s antitrust regulator is taking a deeper look into Microsoft Corp’s $16 billion deal for transcription technology company Nuance Communications Inc, asking customers and competitors to draw up a list of concerns, according to a questionnaire from last month seen by Reuters.

The previously unreported outreach is the most extensive by an antitrust authority since the companies announced the acquisition in April, according to a person familiar with the matter.

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Microsoft declined to comment, and Nuance did not respond to a request for comment.

After minimal review, the U.S. Department of Justice in June and the Australian Competition Commission in October said they would not contest the deal. The companies filed for approval from the European Commission’s competition bureau last month, and the regulator has until Dec. 21 to clear the deal or open a bigger investigation.

The companies had expected to close the deal by the end of this year, but said last month the timeline could slip to early next year.

The questionnaire asks whether Microsoft and Nuance are competitors and whether a tie-up could affect clients and rivals, including whether Microsoft could favor Nuance over competing services.

Nuance primarily sells transcription technology that is popular among doctors and call centers that want to automate note-talking. Analysts view the deal as bolstering Microsoft’s presence in the healthcare market, and bringing it new voice and medical data to train artificial intelligence offerings in health, speech and biometric security.

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Like other big tech companies, Microsoft for years has grown its business through acquisitions, such as in advertising and video gaming. But in the last decade, Microsoft has avoided the target that recently has dogged its competitors Alphabet Inc’s Google, Facebook Inc, Apple Inc and Amazon.com Inc, all of which are facing antitrust lawsuits and investigations on numerous issues.

Steven Weber, a University of California Berkeley professor studying the intersection of technology and health care, said possible concerns about the pending deal could include Microsoft forcing its Office suite on Nuance customers by bundling them together.

Nuance has said it serves 77% of U.S. hospitals.

A key to its success has been has ensuring in deals with customers that it could use their data to advance its voice recognition systems, according to former chief executive Paul Ricci and another former employee.

For instance, a Nuance contract with Augusta University Medical Center, obtained by Reuters this year through a public records request, reads, “Customer shall provide Nuance access to voice and text data…and grants Nuance a perpetual, royalty-free license to copy, use and analyze such data for speech recognition research.”

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Big cloud vendors such as Amazon and Microsoft typically do not have unfettered access to customers’ data for research and development. But the opportunity to acquire those relationships and data explains Microsoft’s interest in Nuance, the former employees said.

Other providers of health transcription technologies include 3M Co and Philips.

(Reporting by Paresh Dave; Editing by Kenneth Li and David Gregorio)

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