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China industrial output, retail sales accelerate but property clouds outlook

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November 15, 2021

By Kevin Yao and Gabriel Crossley

BEIJING (Reuters) -China’s industrial output and retail sales grew more quickly than expected in October, despite fresh curbs to control COVID-19 outbreaks and supply shortages, but the slowing property sector weighed on the economic outlook.

Output grew 3.5% in October from the same period a year ago, official data showed on Monday, accelerating from a 3.1% increase in September. Retail sales growth also picked up.

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The industrial output growth beat expectations of a 3.0% year-on-year increase in a Reuters poll of analysts, but remained the second lowest print this year.

The world’s second-largest economy had staged an impressive rebound from last year’s pandemic slump, but has since lost momentum as it grapples with a slowing manufacturing sector, debt problems in the property market and COVID-19 outbreaks.

“Economic momentum remained weak in October, with the real estate downturn weighing on industry,” said Louis Kuijs, head of Asia economics at Oxford Economics, in a note.

The National Bureau of Statistics (NBS) data also showed retail sales accelerated even as China imposed fresh restrictions to fight a new wave of COVID-19 cases in the north.

Retail sales rose 4.9% year-on-year in October, beating expectations for 3.5% growth and after a 4.4% increase in September.

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“Growth will likely weaken in the rest of this year,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

“The COVID outbreak has forced more cities to tighten travel restrictions, which will likely affect the service sector adversely in November. The property sector slowdown is getting worse,” Zhang said, adding this was “the key risk for the macro outlook in the next few quarters.”

NBS data showed property investment and sales growth continued to slow over January-October compared with the first nine months, and new construction starts measured by floor area fell.

Sentiment in China’s property market has been shaken by a deepening debt crisis, with property giant China Evergrande and Kaisa Group grappling with looming defaults.

POLICY MEASURES

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China’s sprawling manufacturing sector has slowed this year after a blistering recovery from the COVID-19 slump, with electricity shortages and production cuts hampering production in recent months.

“We expect policymakers to take more easing measures to prevent growth from falling too much,” said Oxford’s Kuijs, adding that weaker demand is driving the broader industry slowdown rather than just supply constraints.

Easing measures should start to have an effect early next year, he said.

Policy sources and analysts have told Reuters that China’s central bank will likely move cautiously on loosening monetary policy to bolster the economy, as slowing economic growth and soaring factory inflation fuel concerns over stagflation.

Signs of stagflation are caused by short-term factors like high international commodity prices, said Fu Linghui, an NBS spokesman, at a briefing in Beijing on Monday.

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Fixed asset investment continued to slow, the NBS data showed, rising 6.1% in the first 10 months from the same period a year earlier, compared with the 6.2% increase tipped by a Reuters poll and the 7.3% rise in January-September.

“We think macro policies are close to a turning point. We expect the government will boost fiscal spending around year end to stabilize the weakening trend in investment,” said Zhang.

The more upbeat output data stood in contrast to the country’s official manufacturing survey for October. China’s official purchasing managers’ index https://www.reuters.com/world/china/china-factory-activity-contracts-second-month-official-pmi-2021-10-31 showed factory activity declined for a second straight month in October, hurt by persistently high raw material prices and softer domestic demand.

(Reporting by Kevin Yao, Gabriel Crossley and Albee Zhang; Editing by Sam Holmes and Ana Nicolaci da Costa)

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Apple starts legal action against Russian regulator in App Store dispute -RIA

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December 6, 2021

MOSCOW (Reuters) – Apple has started legal proceedings against Russia’s anti-monopoly regulator in a dispute concerning alternative payment options on its App Store platform, the RIA news agency reported on Sunday citing court filings.

Russia opened an antitrust case against Apple in late October, accusing it of failing to allow app developers to tell customers about alternative payment options when using its App Store. It said Apple could face a fine based on its revenue in Russia if found guilty.

In documents published on Dec. 1, the Moscow Arbitration Court listed Apple as a claimant and Russia’s Federal Anti-monopoly Service (FAS) as a defendant in “economic disputes over administrative legal relations.”

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Apple, which did not immediately respond to a Reuters request for comment, demanded that additional documents be added to the case on Dec. 2, RIA reported.

Forbes Russia cited a FAS representative as saying that the proceedings related to a warning it issued on Aug. 30 over Apple’s alleged failure to inform users they could also pay for purchases outside the App Store.

The FAS did not immediately respond to a request for comment.

Apple faced pushback over its App Store rules in the United States in September when a federal judge issued a ruling forcing the company to allow developers to send their users to other payment systems.

(Reporting by Alexander Marrow; Editing by Andrew Osborn)

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Weaker foreign demand sinks German industrial orders in October

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December 6, 2021

By Michael Nienaber

BERLIN (Reuters) -Weaker demand from abroad drove a much bigger than expected drop in German industrial orders, including cars, in October, data showed on Monday, further clouding the growth outlook for manufacturers in Europe’s largest economy.

A pandemic-related scarcity of microchips and other electronic components has caused massive supply bottlenecks and production problems in Germany’s mighty automobile industry and other important sectors of the economy.

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Orders for goods ‘Made in Germany’ dropped 6.9% on the month in seasonally adjusted terms after a revised rise of 1.8% in September and a plunge of 8.8% in August, figures from the Federal Statistics Office showed.

A Reuters poll of analysts had pointed to a smaller decline of 0.5% on the month in October.

“After incoming orders climbed to an all-time high in mid-2021, the index has lost more than 16 points in recent months,” the economy ministry said, adding that the second sharp decline within three months put a further damper on the economic outlook.

Excluding distorting factors from bookings for big ticket items such as planes, industrial orders were still down 1.8%, the data showed.

The drop was driven by a decline in foreign orders of more than 13% on the month, with demand from countries outside the euro zone such as China particularly weak. Orders from domestic clients rose 3.4%.

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“New lockdowns in Asia are slowing industry in Germany,” VP Bank analyst Thomas Gitzel said. He added that the current wave of coronavirus infections across the globe was putting a renewed burden on the world economy.

Gitzel said that domestic demand should remain strong, helped by the new ruling coalition’s commitment to massive investment in the green economy.

“The decarbonization of the economy requires major investments in new technologies. German industry can and will benefit from this,” Gitzel said.

The weak orders data suggest that manufacturing will hamper overall economic growth in the coming months, with analysts expecting stagnation at best in the final quarter of this year.

(Reporting by Michael Nienaber, editing by Kirsti Knolle and Philippa Fletcher)

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Marketmind: Chasing the Omicron dip

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December 6, 2021

A look at the day ahead from Julien Ponthus.

Buying the dip triggered by the Omicron COVID-19 variant across global markets has proven a costly strategy so far. But some investors seem determined to have another go.

European and U.S. stocks futures are trading sharply higher after ending last week on a sour note and notwithstanding a dismal day in Asia where an MSCI index of Asia-Pacific shares outside Japan lost about 0.9%.

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The region has seen a series of corporate setbacks after ride-hailing giant Didi decided to withdraw from the New York stock exchange last week.

Shares in China Evergrande, the world’s most indebted developer, plunged 14% after it said there was no guarantee it would have enough funds to meet debt repayments.

Another giant, Alibaba dropped 5% after announcing it would reorganise its international and domestic e-commerce businesses. And U.S. regulatory opposition to the sale of Softbank-owned chip firm Arm pushed the Japanese conglomerate 8% lower.

But the mood is lighter already across Europe, allowing 10-year Treasury yields to claw back some of Friday’s falls which took them below 1.4% for the first time since late September.

There are five trading sessions left before Friday’s U.S. consumer price report which some reckon will provide the green light for the Federal Reserve to accelerate its tapering of bond purchases.

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Oil prices too rose by more than $1 a barrel after Saudi Arabia raised prices for its crude sold to Asia and the United States.

And if the market mood is perking up, there is no sign of that in Bitcoin which has fallen further and is now at $48,244 — some $20,000 below peaks hit a month ago.

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

-Vivendi is open to discuss with Rome over state control on TIM’s network

-Alibaba overhauls e-commerce businesses, names new CFO

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-Swiss National Bank Vice Chairman Zurbruegg to retire in July 2022

-Weaker foreign demand sinks German industrial orders in October

-CBI cuts UK economic growth forecasts on supply chain hit

-Euro zone finance ministers to discuss 2022 draft budgets, euro summit

– Russian President Vladimir Putin visits India

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– UK construction PMI/new car sales

-Euro zone finance ministers to discuss 2022 draft budgets, euro summit

BOE deputy Governor Broadbent, ECB Governor Lagarde and board member Panetta speak:

(Reporting by Julien Ponthus; editing by Sujata Rao)

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