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Asian stocks slump, dollar shines as inflation fears flare

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November 11, 2021

By Kevin Buckland

TOKYO (Reuters) – Inflation fears pressured Asian stocks and buoyed the dollar at an almost 16-month high on Thursday after U.S. consumer prices surged at the fastest pace since 1990, boosting the case for faster Federal Reserve policy tightening.

However, the region’s biggest markets in mainland China and Japan bucked the trend, supported respectively by easing worries about troubled property developer Evergrande and a weaker yen, which helps Japanese exporters.

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Regional bond yields tracked a surge in U.S. Treasury yields overnight, when the U.S. benchmark 10-year yield leapt by the most since February. At the same time, U.S. real yields, which take inflation into account, dipped to record lows.

Inflation expectations soared, with the five-year breakeven inflation rate hitting a record 3.113%

“The inflation numbers surprised on the upside, and they may not even be the peak,” said ING economist Rob Carnell.

“The market thinks the Fed, and most other central banks, are behind the curve,” meaning a more rapid tightening than policy makers have so far communicated, he said. “Risk assets hate this.”

MSCI’s broadest index of Asia-Pacific shares outside Japan slid 0.57%.

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But Chinese blue chips rallied 1.28%, led by real estate stocks, with a source telling Reuters some Evergrande bondholders received overdue coupon payments, easing concerns about a potentially destabilising default.

Japan’s Nikkei was another outlier, climbing 0.6% as the yen weakened as far as 114.15 per dollar on Thursday, from as strong as 112.73 earlier in the week, a near one-month high.

Futures signaled a subdued start for Europe, with Euro Stoxx 50 futures down 0.33% and FTSE futures about flat.

U.S. stock futures ticked up 0.1%. On Wednesday, the S&P 500 tumbled 0.82%, its worst day in more than a month.

The dollar index, which gauges the currency against six major peers including the yen and euro, climbed as high as 95.002 for the first time since July of last year.

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The U.S. consumer price index surged 6.2% on an annual basis, with gasoline leading a broad-based increase, adding to signs that inflation could stay uncomfortably high well into 2022.

The Fed has maintained that prices will fall once supply bottlenecks start easing, and only last week urged patience, reiterating that high inflation is “expected to be transitory”.

“The Fed’s resolve is facing a testing time,” Rodrigo Catril, a senior foreign-exchange strategist at National Australia Bank in Sydney, wrote in a client note.

“Supply constraints may well turn out to be transitory, but the rise in core drivers increases the pressure on the Fed to trigger a monetary policy response.”

The money market now prices a first Fed interest rate increase by July.

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Benchmark 10-year Treasury yields jumped the most in seven weeks to as high as 1.592% on Wednesday. The Treasury market is closed globally Thursday for a U.S. holiday.

That volatility spilled into other markets, with the CBOE Volatility index, Wall Street’s so-called fear gauge, touching its highest level in nearly one month.

Investors sought inflation hedges, with gold jumping to a five-month high of $1,868.20 overnight before easing to around $1,850 on Thursday, while bitcoin hit a fresh record at $69,000 before last trading around $64,700.

Oil steadied on Thursday after pulling back sharply from near seven-year highs the previous day, when U.S. President Joe Biden said his administration was looking for ways to reduce energy costs.

U.S. West Texas Intermediate (WTI) crude gained 21 cents to $81.55 per barrel, but well off the overnight high of $84.97 and last month’s seven-year peak.

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Brent crude futures rose 18 cents to $82.82 a barrel, but down from as high as $85.50 on Wednesday and October’s three-year peak of $86.70.

(Editing by Lincoln Feast and Sam Holmes)

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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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