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Stocks rally in Asia, China property sector worries dampen sentiment

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October 26, 2021

By Kane Wu

HONG KONG (Reuters) – Asian stocks largely rallied on Tuesday, following Wall Street’s record highs overnight, though fresh worries about China’s property sector weighed on investors’ sentiments.

Europe and U.S. markets look set to keep the upward momentum as FTSE futures and E-mini futures for the S&P 500 index were up 0.06% and 0.24% respectively at 0531 GMT.

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MSCI’s gauge of Asia Pacific stocks outside Japan rose 0.15% and briefly touched its highest in six weeks on Tuesday, after gaining throughout October.

The Asian regional benchmark however is down about 11% from its February high compared to the MSCI world equity index which is in sight of its record high hit six weeks ago.

“Equity prices are likely to be driven by technical positioning this week, as trade enters the final week of the month,” said Anderson Alves, an equities trader at global online trading platform ActivTrades.

Japan’s benchmark Nikkei average gained nearly 1.8%, while Australia’s S&P/ASX 200 closed 0.03% higher.

The CSI300 index inched 0.05% higher led by information technology stocks, but the Hong Kong benchmark Hang Seng Index eased 0.4%.

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China property stocks extended their losses in the afternoon sessions as another developer, Modern land, defaulted on a payment, adding to worries about spiralling effects of the debt crisis at China Evergrande Group.

An index of Hong Kong-listed mainland property firms dropped 4.7% and the mainland’s CSI 300 Real Estate Index was down 2.4%.

China has said it will roll out a pilot real estate tax in some regions, adding to existing investor concerns about real estate in the mainland.

Edison Pun, Senior Market Analyst at Saxo Markets in Hong Kong noted that markets remained on a strong trend, having begun digesting the prospect that the U.S. Federal Reserve will begin tapering its monetary stimulus in November.

“However, we need to watch whether it will put on extra pressure on the Chinese property market when the property tax is rolled out. It could hurt consumption in the end if we are seeing an overall downturn in Chinese property prices,” he said.

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A large proportion of S&P 500 companies are due to report results this week, including technology heavyweights Facebook, Apple Inc, Amazon, Microsoft, and Alphabet, which have been the drivers of the market rally this year.

“Of the S&P 500 firms that have reported this season, the net surprise on earnings has been 13%. So it is easy to understand the optimism percolating through risk appetite despite inflation fears,” said ANZ Research in a note.

“The economy remains very strong. We expect the recovery will re-accelerate once bottlenecks and COVID concerns subside.”

The European Central Bank and Bank of Japan are both set to hold monetary policy meetings on Thursday, although neither are expected to take major action on interest rates.

The Dow Jones Industrials and S&P 500 closed at record highs on Monday. Tesla, which jumped 12.66% and breached $1 trillion in market capitalisation, also provided the biggest boost to the S&P 500 and the Nasdaq.

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Benchmark 10-year U.S. Treasury notes were steady at 1.6397% off last week’s five month top of 1.7% as uncertainty about when the Federal Reserve would raise rates to curb rising inflation weighed on market sentiment.

The dollar rose 0.1% on Tuesday, recovering from a near one-month trough hit during the previous session.

Already nudging multi-year highs, oil prices rose marginally in a market gripped by tight global supply and strengthening fuel demand in the United States and beyond.

Brent crude futures pared earlier losses to stand at$86.11 a barrel, up 0.14%, while the U.S. West Texas Intermediate (WTI) crude futures edged 0.01% higher to $83.76 a barrel.

Spot gold was down nearly 0.2% to around $1,804 per ounce.

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(Reporting by Kane Wu; additional reporting by Alun John; Editing by Sam Holmes & Simon Cameron-Moore)

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Buying the Omicron dip

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November 29, 2021

A look at the day ahead from Danilo Masoni.

Sell first, get answers later. With stocks near lifetime peaks, the Black Friday reaction to the new fast-spreading virus strain Omicron was hardly surprising.

But a weekend later, investors look heavily engaged in buying the dip, as markets take a more balanced view of risks attached to what the WHO called a “variant of concern”.

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After their ninth biggest drop ever on Friday, gains in crude prices topped 5% earlier in Asia and stock futures point to a solid bounce across Europe and America.

A South African doctor said patients with Omicron have “very mild” symptoms and investment houses don’t look to have budged that much. Credit Suisse, for example, made no portfolio changes, staying slight overweight on equities.

Perhaps more telling is that retail traders poured north of $2 billion into U.S. stocks on Friday, setting the second biggest daily inflow on record, per Vanda Research data.

Of course there are uncertainties and that will likely make for volatile days heading into the Christmas shopping season.

Understanding the level of severity of the variant “will take days to several weeks”, said WHO. And vaccine maker BioNTech needs up to two weeks to figure out whether the shot it makes with Pfizer needs to be reworked.

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So while Omicron has spread from Australia to the Netherlands and governments ban travel and mull lockdowns, markets may also gamble on central bankers turning more patient in their path towards rates normalisation.

Lots of speakers from the Federal Reserve and the European Central Bank are lined up for today. On Sunday, speaking about risks to the recovery, ECB’s Lagarde said: “We now know our enemy and what measures to take.”

Key developments that should provide more direction to markets on Monday:

* ECB speakers: Governor Lagarde, ECB board members AndreaEnria, Isabel Schnabel, Pentti Hakkarainen; ECB Vice PresidentLuis de Guindos * Euro zone consumer sentiment/inflation expectations * German preliminary CPI/HICP * Fed speakers: Chairman Jerome Powell, New York PresidentJohn Williams, Governor Bowman * Emerging markets: Kenya central bank meets; Turkey tradebalance and bank NPL ratios (This story refiles to fix chart)

(Reporting by Danilo Masoni; Editing by Saikat Chatterjee)

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UK regulator set to block Meta’s Giphy deal – FT

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November 29, 2021

(Reuters) -The UK competition regulator is expected to block Meta Platforms’ acquisition of online GIF platform Giphy in the coming days, the Financial Times reported https://www.ft.com/content/662c8e3f-4909-4bec-9131-c0237bb4897d on Monday.

The Competition and Markets Authority is set to reverse the deal in what would be the first time the watchdog has reversed a Big Tech acquisition, the report said, citing individuals close to the matter.

Meta Platforms and the regulator did not respond to requests for comment from Reuters sent outside working hours.

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The regulator had in October fined the U.S. social media giant Facebook, now Meta, 50.5 million pound ($67.35 million) for breaching an order that was imposed during an investigation into its purchase of the GIF platform, Giphy.

Facebook bought Giphy, a website for making and sharing animated images, or GIFs, in May last year to integrate it with its photo-sharing app, Instagram. The deal was then pegged at $400 million by Axios.

($1 = 0.7499 pounds)

(Reporting by Sneha Bhowmik in Bengaluru; Editing by Uttaresh.V)

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Evergrande shares fall after chairman cuts stake; Fantasia suspends trading

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November 29, 2021

HONG KONG (Reuters) – Shares in China Evergrande Group fell as much as 4.8% on Monday morning, after its chairman trimmed his stake in the cash-strapped property developer to raise about $344 million.

The group’s electric vehicle unit, China Evergrande New Energy Vehicle Group Ltd, also dropped more than 5% after it said the company was still exploring ways to pump capital into the unit with different investors.

Evergrande has been scrambling to raise capital as it grapples with more than $300 billion in liabilities and Chinese authorities have told its chairman, Hui Ka Yan, to use some of his personal wealth to help pay bondholders, sources have said.

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Evergrande failed to pay coupons totalling $82.5 million due on Nov. 6 and investors are on tenterhooks to see if it can meet its obligations before a 30-day grace period ends on Dec 6.

The developer disclosed late on Friday that Hui had sold 1.2 billion shares in the company at an average price of HK$2.23 each, lowering his stake in the Shenzhen-based real estate developer to 67.9% from 77%.

Once China’s top-selling developer, Evergrand’e troubles have hit the broader Chinese property sector with a string of debt defaults and credit rating downgrades of its peers in the last couple of months.

Fantasia Holdings suspended trading in company shares on Monday pending release of information. On Thursday, the developer said a winding-up petition was filed against a unit related to an outstanding loan.

(Reporting by Sumeet Chatterjee; Editing by Stephen Coates)

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