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Asian shares advance as inflation shock fades to background

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November 12, 2021

By Hideyuki Sano

TOKYO (Reuters) – Asian share prices advanced on Friday as a shock from a surprisingly strong U.S. inflation reading ebbed, with investors hopeful that the worst price hikes could be soon over.

Japan’s Nikkei gained 1.1%, helped by brisk earnings. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.25% but mainland Chinese shares were softer, with CSI 300 index slipping 0.3%.

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European stocks are expected to edge higher, with Euro Stoxx futures up 0.15% and Britain’s FTSE futures 0.1% higher.

U.S. stock futures ticked up 0.1% in Asia after a mixed session on Thursday when the S&P 500 ended 0.06% higher while tech-heavy Nasdaq rose 0.52%.

The world’s stock prices posted their biggest fall in over a month on Wednesday following a surprisingly strong reading on U.S. inflation.

The U.S. consumer price index rose 6.2% year-on-year in October, the strongest advance since November 1990.

“Inflation is obviously a risk to watch. But stock prices will face a major crash only if the Federal Reserve turns out to be completely wrong in its assessment and is forced to raise interest rates rapidly. That’s not where we are now,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

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While the inflation data suggested that the current wave of price spikes due to chronic worldwide supply constraints could have more staying power than many had hoped, many investors still think inflationary pressure will eventually ease, rather than strengthen.

“If we get over the year-end holiday shopping season, when demand should be peaking, perhaps inflation could subside,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.

“U.S. holiday sales are expected to rise 8.5% to 10% this year, with some consumers said to be starting to buy earlier than usual because of worries about supply glitches. If that’s the case, we could see a pretty strong retail sales number next week, which would be positive for stocks,” he added.

U.S. retail sales for October are due next Tuesday.

Bond yields ticked up, with the 10-year U.S. Treasuries yield rising 0.8 basis points to 1.565% on Friday after a market holiday on Thursday.

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Money markets have already priced in two rate hikes next year.

In the currency market, the dollar held firm after Wednesday’s strong U.S. inflation reading fanned expectations the Fed would tighten monetary policy faster than previously thought.

An index of the dollar against six other currencies rose to a 16-month high of 95.264 as the euro slipped to $1.1436, its lowest since July last year.

The yen softened to 114.30 per dollar, near its four-year low hit last month while commodity currencies such as the Australian dollar and the Canadian dollar were on a back foot.

The Australian dollar hit a five-week low of $0.7277 while the Canadian dollar slipped to C$1.2600 per dollar, a low last seen in early October.

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“It is interesting if a growing number of investors are selling commodity currencies on expectations that the Fed’s tightening will drive down commodity prices,” said Makoto Noji, chief FX strategist at SMBC Nikko Securities.

Oil prices dipped as the market grappled with a stronger U.S. dollar along with concern over increasing U.S. inflation, and after OPEC cut its 2021 oil demand forecast due to high prices.

Brent crude futures were down 0.65% at $82.33 per barrel while U.S. West Texas Intermediate (WTI) futures dropped 0.58% to $81.12 per barrel.

Gold prices stayed near Wednesday’s five-month highs as investors sought inflation hedges. They last stood at $1,859 per ounce, near Wednesday’s high of $1,868.5.

(Reporting by Hideyuki Sano; Editing by Sam Holmes)

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UK firms struggle to find staff, see higher inflation – BoE survey

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December 2, 2021

LONDON (Reuters) – British companies are struggling to find the staff they need and expect higher inflation in the year ahead, according to a survey published on Thursday by the Bank of England which is weighing up whether to raise interest rates this month.

The BoE’s monthly Decision Maker Panel survey showed 85% of respondent firms were finding it harder to recruit new employees compared to normal, with 58% reporting it to be much harder.

The survey also showed year-ahead annual price inflation was expected to be 4.2%, up from 3.9% in the October survey.

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(Writing by William Schomberg, editing by Andy Bruce)

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Sustainable investors look for profits in fuzzy data

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December 2, 2021

By Ross Kerber and Simon Jessop

(Reuters) – Sustainability-focused investors believe a little effort can go a long way toward finding profitable opportunities buried in incomplete corporate environmental or social impact filings.

That is according to several speakers on a panel at  the  Reuters Next conference, who described how they choose sustainable investments and work with executives at a time when there are few standard requirements for how major U.S. and European companies should detail carbon emissions disclosures or workforce demographics.

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Eoin Murray, head of investment at Federated Hermes, said the disparate reports from many companies give portfolio managers the chance to dig deeper.

“As an active manager, there’s a part of me which doesn’t mind that some of the data doesn’t entirely line up, because it means the rewards go to those that do their homework properly and unearth the real gems,” Murray said.

Mary Jane McQuillen, a managing director for ClearBridge Investments, said while some companies are eager to become more sustainable, others are defensive and don’t want to be burdened by yet another topic of investor interest.

A third group, McQuillen said, admits there is much about sustainable reporting they don’t know, and is seeking input from their shareholders.

“They say, ‘we really don’t know what the issues are. If you can help us as an owner, and with your years of experience as an investor in understanding how these issues may apply to my industry, as well as to my particular company, that would be super helpful,” she said.

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U.S. regulators are in the process of developing guidance for how companies should spell out things like emissions, and rules in Europe are just coming into place.

At the U.N. climate change conference in Glasgow, Scotland, in November, global leaders agreed to do more to curb carbon emissions and took other steps toward setting up global carbon markets and an international body to set sustainability reporting standards.

Julie Gorte, senior vice president at Impax Asset Management, said absent complete corporate reporting, investors can still learn a great deal about companies’ environmental, social or governance impact through government filings.

“For companies the watchword is, look, people are going to find out stuff about you, whether you tell them or not. If you want them to know what the truth is, tell them,” Gorte said.

To watch the Reuters Next conference please register here https://reutersevents.com/events/next/

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(Reporting by Ross Kerber and by Simon Jessop; Editing by Sonya Hepinstall)

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Facebook could be sued by consumer groups, EU court adviser says

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December 2, 2021

By Foo Yun Chee

BRUSSELS (Reuters) – Facebook could be sued by consumer groups for privacy violations, an adviser to Europe’s top court said on Thursday, in a German online gaming case that could pave the way for similar action across the EU.

The case started in 2012 and is one of several privacy and antitrust headaches facing Facebook in Europe, where regulators have introduced legislation to curb the power of so-called tech giants and ensure more transparency.

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“Member states may allow consumer protection associations to bring representative actions against infringements of the protection of personal data,” Richard de la Tour, advocate general at the Luxembourg-based Court of Justice of the European Union (CJEU), said in an opinion.

Such actions must be based on infringements of rights derived directly from GDPR, he added, referring to the landmark EU privacy rules adopted three years ago.

“We’ll analyse the Advocate General’s opinion. Legal clarity on scope and process of GDPR is important and we’re glad the Court of Justice of the European Union is considering the questions raised in this case.” said a spokesperson Meta Platforms Inc.

GDPR stipulates that any requests to collect personal data should be subject to clear and informed consent.

De la Tour said consumer bodies that defend the collective interests of consumers are particularly suited to GDPR’s objective of establishing a high level of personal data protection.

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Facebook found itself in the dock after the Federation of German Consumer Organisations filed a lawsuit alleging that the social network had allowed operators of online games to improperly collect the personal data of gamers.

The games were offered on Facebook’s App Center in 2012. By playing the games, users automatically agreed to share personal data including email addresses. At the end of the game, they would receive a message saying that the app could post their status, photos and other information.

A German lower court had ruled in favour of the German federation, leading Facebook to appeal to a higher court, which subsequently sought advice from the CJEU.

Facebook has since revamped its privacy settings.

(Reporting by Foo Yun Chee; Editing by David Goodman)

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