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Election surprise lifts Nikkei, Fed keeps dollar bid

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November 1, 2021

By Tom Westbrook

SINGAPORE (Reuters) – Asian stocks wavered on Monday, with Japanese companies catching a post-election boost but weak Chinese data weighing on the broader mood ahead of policy meetings in the United States, Britain and Australia that are set to define the rates outlook.

Japan’s Nikkei rose 2.3% to a one-month high after Prime Minister Fumio Kishida’s Liberal Democratic Party won a unexpectedly comfortable victory, raising hopes for stability and stimulus in the term ahead.

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Trade elsewhere was soft, with MSCI’s index of Asia-Pacific shares outside Japan dragged 0.4% lower by selling in Hong Kong after weekend data showed a sharper-than-expected contraction of Chinese factory activity.

S&P 500 futures and FTSE futures drifted 0.2% higher, European futures rose 0.6%. Bond markets were calm following the brutal sell-off in short-term rates last month as surging inflation reshaped investors’ outlook.

Commodities also stabilised, with a slight easing of oil prices and a further drop in Chinese coal prices pushing them 50% below last month’s record high.

“I think we may come out of (the) week past peak yield volatility, or at least, past peak rate hike fever,” said NatWest Markets strategist John Briggs.

“A lot of the things that went parabolic and took market rate hike expectations to a boil are at least looking like they are calming a bit.”

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The yield on two-year Treasuries, which had soared to an almost 20-month high of 0.5640% last week was last up about 1.6 basis points at 0.5169%. Benchmark 10-year Treasury yields were steady at 1.5627%. [US/]

In currency markets, the dollar held sharp Friday gains and traded firmly in the Asia session. It rose as far as 114.26 yen and climbed 0.1% to $1.1546 per euro. [FRX/]

Brent crude futures traded 0.3% lower at $83.47 a barrel and U.S. crude fell 0.4% to $83.20. [O/R]

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The Fed is the highlight of a week full of central bank meetings likely to move markets, with policy adjustments possible at the Bank of England and Reserve Bank of Australia.

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The Fed, which concludes a two-day meeting on Wednesday, is expected to say it will start to taper bond purchases, though markets’ focus is on clues about rates lift-off.

Fed funds futures are pricing hikes beginning early in the second half of 2022 and Goldman Sachs on Friday pulled forward its hike forecast to July next year from the third quarter of 2023.

“While maintaining the view that most of the inflation we are seeing will prove transitory, a risk management mindset has taken over, and developed market central banks are now changing tack,” analysts at Goldman Sachs said in a late-Friday note.

“The Bank of England looks likely to raise rates (and) the Reserve Bank of Australia appears to have abandoned its yield curve peg.”

Swaps pricing points a better-than-even chance of the Bank of England hiking on Thursday while the Reserve Bank of Australia will likely make some sort of guidance adjustment after again declining to defend its yield target on Monday.

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Nevertheless, a bid crept back in to Australia’s battered bond market, lifting three-year Australian government bond futures 18 ticks to 98.780. [AUD/]

Sterling edged to a two-week low of $1.3663. [GBP/]

Ahead on the data front are purchasing managers index figures in Scandinavia, Britain and the United States.

Asian readings were mixed, with Caxin’s survey confounding Sunday’s soft official reading and surveys in Thailand, Malaysia, Vietnam and Indonesia strong, against a slowdown in South Korea.

Gold nursed Friday losses against a stronger U.S. dollar and bought $1,784 an ounce. Bitcoin held its $60,000 support level.

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(Reporting by Tom Westbrook; Editing by Sam Holmes)

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U.S. stock futures, oil regain some ground after Omicron battering

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November 29, 2021

By Wayne Cole

SYDNEY (Reuters) – Asian markets regained a little composure on Monday as investors settled in for a few weeks of uncertainty on whether the Omicron variant would really derail economic recoveries and the tightening plans of some central banks.

Oil prices also bounced $3 a barrel to recoup some of Friday’s shellacking, while the safe haven yen took a breather after its run higher.

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The new variant of concern was found as far afield as Canada and Australia as more countries imposed travel restriction to try to seal themselves off.

Britain called an urgent meeting of G7 health ministers on Monday to discuss developments on the virus, although a South African doctor who had treated cases said symptoms of Omicron were so far mild.

“There is a lot we don’t know about Omicron, but markets have been forced to reassess the global growth outlook until we know more,” said Rodrigo Catril, a market strategist at NAB.

“Pfizer expects to know within two weeks if Omicron is resistant to its current vaccine, others suggest it may take several weeks. Until then markets are likely to remain jittery.”

Trading was erratic early on Monday but there were signs of stabilisation as S&P 500 futures added 0.8% and Nasdaq futures 0.9%.

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Both indices suffered their sharpest fall in months on Friday with travel and airline stocks hit particularly hard.

MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.1% but was off early lows. Likewise, Japan’s Nikkei pared early losses to be down 0.9%.

Bonds gave back some of their gains, with Treasury futures down 11 ticks. The market had rallied sharply as investors priced in the risk of a slower start to rate hikes from the U.S. Federal Reserve, and less tightening by some other central banks.

Two-year Treasury yields edged up to 0.55%, after falling 14 basis points on Friday in the biggest drop since March last year. Fed fund futures had pushed the first rate rise out by a month or so.

The shift in expectations undermined the U.S. dollar, to the benefit of the safe haven Japanese yen and Swiss franc.

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Early Monday the dollar had steadied somewhat at 113.81 yen, after sliding 1.7% on Friday. The dollar index held at 96.190, after Friday’s 0.7% drop.

The euro paused at $1.1294, following its rally from $1.1203 late last week.

European Central Bank President Christine Lagarde put a brave face on the latest virus scare, saying the euro zone was better equipped to face the economic impact of a new wave of COVID-19 infections or the Omicron variant.

The economic diary is also busy this week with China’s manufacturing PMIs on Tuesday to offer another update on the health of the Asian giant. The U.S. ISM survey of factories is out on Wednesday, ahead of payrolls on Friday.

Fed Chair Jerome Powell and Treasury Secretary Janet Yellen speak before Congress on Tuesday and Wednesday.

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In commodity markets, oil prices bounced after suffering their largest one-day drop since April 2020 on Friday.

“The move all but guarantees the OPEC+ alliance will suspend its scheduled increase for January at its meeting on 2 December,” wrote analyst at ANZ in a note.

“Such headwinds are the reason it’s been only gradually raising output in recent months, despite demand rebounding strongly.”

Brent rebounded 3.9% to $75.57 a barrel, while U.S. crude rose 4.5% to $71.24.

Gold has so far found little in the way of safe haven demand, leaving it stuck at $1,791 an ounce.

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(Reporting by Wayne Cole; Editing by Richard Pullin & Shri Navaratnam)

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Nissan Motor to spend $17.6 billion to accelerate electrification

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November 29, 2021

TOKYO (Reuters) – Nissan Motor Co said on Monday it will spend 2 trillion yen ($17.59 billion) over the next five years to accelerate vehicle electrification as it bets tighter carbon emission restrictions will spur demand for electric cars and hybrids.

Japan’s No. 3 car maker will introduce 23 electrified vehicles by 2030, including 15 electric vehicles (EV), and plans to introduce all solid-state batteries by March 2029, it said in a statement.

Nissan’s deeper push into battery-powered cars comes as consumer demand for such vehicles grows in key auto markets such as China and the United States and as its competitors release new electric vehicles.

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Although still only a small portion of vehicles on the road, global electric car registrations in 2020 grew 41% even as the overall car market contracted by almost a sixth, according to the International Energy Agency (IEA).

Nissan, like other Japanese car makers, however, has yet to commit to completely abandoning fossil-fuel vehicles.

At the U.N. climate summit in Glasgow this month, major car makers, including General Motors and Ford Motor Co, signed on to a declaration that committed them to phase out fossil fuel vehicles by 2040.

($1 = 113.7000 yen)

(Reporting by Tim Kelly; Editing by Christopher Cushing and Muralikumar Anantharaman)

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Shares of Macau casino operator Suncity suspended -HKEX

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November 29, 2021

HONG KONG (Reuters) – Shares of Suncity Group Holdings Ltd were suspended on Monday after its chief executive was believed to be among 11 people arrested by Macau authorities on Sunday over alleged links to cross-border gambling and money laundering.

The South China Morning Post reported that Macau police said on Sunday a 47-year-old businessman surnamed Chau was among those arrested. Alvin Chau is head of Suncity.

Suncity could not be reached for comment. Shares of the company last closed at HK$0.255.

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(Reporting By Anne Marie Roantree; Editing by Kim Coghill)

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