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Asian shares mixed as investors await crucial Fed decision

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November 2, 2021

By Paulina Duran

SYDNEY (Reuters) – Global shares idled just below record highs on Tuesday and currencies held tight ranges as nervous investors awaited the Federal Reserve’s policy meeting, one of several central bank decisions this week that could set the tone for risk appetite.

The Reserve Bank of Australia was the main focus on Tuesday, as it took a step toward unwinding extraordinary pandemic stimulus policies by abandoning an ultra-low target for bond yields. The spotlight now swings to the Fed and then the Bank of England, which also have meetings this week.

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Asian shares were mixed with the MSCI’s gauge of Asia-Pacific stocks outside Japan holding steady at 0435 GMT, Japan’s Nikkei edging 0.4% lower and futures pointed to a weaker European and U.S. open.

The MSCI’s world equities index was down a marginal 0.02%, with Pan-region Euro Stoxx 50 futures 0.25% lower and E-mini futures for the S&P 500 index down 0.21%.

In Asia, the RBA defied investor expectations for a more hawkish pivot, pushing the Aussie and kiwi dollars lower and drove short-term bonds higher.

“The market was pricing way more,” said GSFM investment strategist Stephen Miller. “They thought that the RBA would take bigger steps to remove monetary accommodation given the upside risks to inflation and I think the RBA have made the minimum adjustment possible.”

The Aussie was 0.25% lower to be within its two-week range at $0.75 while the kiwi moved 0.1% lower to $0.7172. Australia’s S&P/ASX 200 was down 0.5%.

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Australian 3-year benchmark bond yields were 6 basis points lower at 0.98%, compared with their recent 1.267% high on Oct. 29, while 10-year bonds pared earlier losses to push yields to 1.958%.

U.S. 10-year yields held steady and 2-year treasury yields were one basis point lower to 0.491%.

Chinese shares fell 0.6%, dragged by financials and consumer firms even as the country’s cabinet pledged more support for the consumer services sector, while tech stocks drove Hong Kong’s Hang Seng index 0.6% higher.

South Korea’s KOSPI index gained 1.50%.

Overnight, Wall Street advanced to record highs helped by gains for energy shares and Tesla.

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The Dow Jones Industrial Average rose 0.26%, after eclipsing 36,000 points for the first time during intraday trading. The S&P 500 gained 0.18% while the Nasdaq Composite added 0.63%.

The yen was 0.31% weaker at 113.65 per dollar and the euro also edged 0.07% lower to $1.15995.

The Fed on Wednesday is expected to approve plans to scale back its $120 billion monthly bond-buying programme, while investors will also focus on commentary about interest rates and how sustained the recent surge in inflation is.

“The elephant in the room is headline and underlying inflation, which are higher than the (Fed) was anticipating,” said Standard Chartered’s head of G10 FX, Steve Englander.

“We expect the (Federal Open Market Committee) to state that the Fed is ready to act decisively if inflation is not moving towards target levels when tapering ends, but it still expects inflation to fall as supply constraints ease. We think investors will see this as advancing the likely timing of Fed rate hikes,” he said.

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In commodities markets, a further 4% drop in Chinese coal prices on Tuesday pushed them 50% below last month’s record high.

Oil prices were little changed as expectations of strong demand and a belief that a key producer group will not turn on the spigots too fast helped reverse initial losses caused by the release of fuel reserves by No. 1 world energy consumer China.

U.S. crude was 0.08% lower at $83.98 per barrel and Brent was trading at $84.76, up 0.03%.

Spot gold was 0.1% higher to $1,793.24 an ounce. Bitcoin was 0.7% higher at $61,365.2.

(Reporting by Paulina Duran in Sydney, Katanga Johnson on Washington and Herbert Lash in New York; Editing by Sam Holmes)

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Yen shines, Aussie sags as Powell turns hawk despite Omicron uncertainty

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December 1, 2021

By Kevin Buckland

(Reuters) – The safe-haven yen held steady on Wednesday, while the risk-sensitive Australian dollar languished near a one-year low after Federal Reserve Chair Jerome Powell signalled a faster taper of stimulus despite the risks around the Omicron COVID-19 variant.

Investors fear that hasty monetary tightening could choke off the nascent economic recovery, with little still known about Omicron’s potential to evade current vaccine protection or how deadly it might be.

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“Investors are staying cautious,” said Shusuke Yamada, chief Japan FX strategist at Bank of America-Merrill Lynch.

“It’s very difficult to make a judgement about the impact of Omicron when we don’t have a lot of information.”

Global markets fell sharply on Tuesday after the head of drugmaker Moderna said existing COVID-19 vaccines would be less effective against the new variant, although BioNTech’s chief executive struck a cautiously positive note, saying the vaccine it makes with Pfizer would likely offer strong protection against severe disease from Omicron.

The Aussie weakened 0.12% to $0.71245 after dipping as low as $0.7063 of Tuesday for the first time since Nov. 3, 2020. The New Zealand dollar was largely flat at $0.68195 after also touching the lowest since early November of last year at $0.6773 in the previous session.

The greenback ticked 0.09% higher to 113.26 yen, but still within sight of an overnight low of 112.535, a level not seen since Oct. 11.

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Powell said in testimony to Congress on Tuesday that Fed officials will discuss at their Dec. 14-15 policy meeting whether to end bond purchases a few months earlier than had been anticipated. The Fed chief finally did an about face on a long-held contention that inflation would be “transitory.”

Powell expressed confidence that the impact from Omicron will be far less than in the spring of 2020, when the pandemic erupted.

In response, traders wound up interest rate hike expectations, with money markets now almost fully priced for tightening at the June meeting.

Powell’s testimony continues later Wednesday.

“Powell’s unexpectedly hawkish tone overnight, essentially asserting that inflation risk has primacy over growth/Omicron risks, should leave the (dollar index) forging ahead,” Westpac strategists wrote in a client note.

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The index, which measures the dollar against six major peers, traded at 95.921 after sliding to 95.544 on Tuesday for the first time since Nov. 18, weighed down largely by an unwinding of bearish bets on the euro, the most heavily weighted component in the basket.

Westpac recommends buying dips in the index down to the mid-95 level.

The single currency slipped 0.04% to $1.1331, down from a two-week high of $1.1387 overnight.

Sterling traded not far from an 11-month low of $1.31945 reached overnight, last changing hands at $1.32955.

(Reporting by Kevin Buckland; Editing by Shri Navaratnam)

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OPEC+ begins two days of talks amid oil rout

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December 1, 2021

LONDON (Reuters) – OPEC and its allies begin two days of meetings on Wednesday to decide whether to release more oil into the market or restrain supply amid an oil price rout and fears the Omicron coronavirus variant could weaken global energy demand.

Oil prices fell to near $70 a barrel on Tuesday from as high as $86 in October, posting their biggest monthly decline since the outset of the pandemic, as the new variant raised fears of a supply glut.

For November, Brent fell by 16.4%, while WTI fell 20.8%, the biggest monthly fall since March 2020.

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“The threat to oil demand is genuine,” said Louise Dickson, senior oil markets analyst at Rystad Energy. “Another wave of lockdowns could result in up to 3 million bpd (barrels per day) of oil demand lost in the first quarter of 2022.”

Also pressuring prices, Federal Reserve Chair Jerome Powell said the U.S. central bank likely will discuss speeding its reduction of bond purchases amid a strong economy and expectations that a surge in inflation will persist.

The Organization of the Petroleum Exporting Countries (OPEC) will meet on Wednesday after 1300 GMT, followed by a meeting on Thursday of OPEC+, which groups OPEC with allies including Russia.

Several OPEC+ ministers, including from Russia and Saudi Arabia, have said there was no need for a knee-jerk reaction from the group.

But some analysts have suggested OPEC+ might put plans to add 400,000 barrels per day (bpd) to supply in January on hold.

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The group was already weighing the effects of last week’s announcement by the United States and other countries to release emergency crude reserves to temper energy prices.

OPEC+ has been gradually winding down record supply cuts of 10 million bpd implemented last year and currently has some 3.8 million bpd of reductions still in place.

The increase in OPEC’s oil output in November has again undershot the rise planned under a deal with allies, a Reuters survey found.

(Reporting by OPEC team, writing by Dmitry Zhdannikov, editing by Richard Pullin)

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New York accuses Amazon of backsliding over worker safety, seeks monitor

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December 1, 2021

By Jonathan Stempel

NEW YORK (Reuters) -New York state’s attorney general on Tuesday asked a state judge to appoint a monitor to oversee worker safety at an Amazon.com Inc fulfillment center in New York City, citing the retailer’s alleged rollbacks of COVID-19 safety measures that were “already inadequate.”

Letitia James, the attorney general, also wants a court order requiring the rehiring of Christian Smalls, who Amazon fired for allegedly violating a paid quarantine by leading a March 2020 protest over conditions at the Staten Island facility.

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James, a Democrat running to become New York governor, sued https://www.reuters.com/article/us-amazon-com-complaint/new-york-attorney-general-sues-amazon-over-covid-19-shortfalls-idUSKBN2AH0C2 Amazon in February in a New York state court in Manhattan over its safety protocols for thousands of workers at the Staten Island facility and a distribution center in the New York City borough of Queens.

She said Amazon is valuing profit over safety and “acting as if the pandemic is over” by rolling back safety protocols even as the Omicron variant https://www.reuters.com/business/healthcare-pharmaceuticals/omicron-variant-could-outcompete-delta-south-african-disease-expert-says-2021-11-30 of the COVID-19 virus threatens to increase transmission rates.

The alleged rollbacks include making the Staten Island facility “mask-optional” for vaccinated workers while not requiring masks for unvaccinated workers, and failing to enforce social distancing.

In her motion for a preliminary injunction, James said the proposed monitor would oversee upgraded cleaning, hygiene and social distancing procedures.

“While case rates, hospitalizations, and deaths rise, Amazon rescinds protections and packs in more workers for its holiday rush,” James said in her motion. “Amazon’s ongoing – and worsening – failure to protect workers must be halted.”

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Amazon said in a statement it has taken a “comprehensive approach” to COVID-19 safety.

“It’s disappointing that the Attorney General is seeking to politicize the pandemic by asking for ’emergency’ relief now despite having filed this lawsuit nine months ago,” Amazon said.

The Seattle-based company is appealing a judge’s refusal in October to dismiss James’ lawsuit.

Amazon on Nov. 15 reached a separate settlement with California https://www.reuters.com/legal/government/amazon-settles-california-claims-it-concealed-covid-19-cases-workers-2021-11-15 over claims it violated a state “right-to-know” law by concealing from warehouse workers and local health agencies the numbers of workers being infected with COVID-19.

(Reporting by Jonathan Stempel in New York; Editing by Matthew Lewis and Stephen Coates)

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