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Global share rally pauses in Asia as China property weighs

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November 5, 2021

By Alun John

HONG KONG (Reuters) – Asian shares failed to latch on to a global record-setting rally on Friday, held back by Chinese property stocks, while the dollar stood tall following a week in which central banks around the world refrained from any hawkish surprises.

The U.S. currency made solid strides against sterling, which took a beating after the Bank of England confounded markets by passing up a chance to raise interest rates on Thursday.

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MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.14% and was flat on the week, while Japan’s Nikkei fell 0.7%, albeit from a month high reached the day before, as manufacturers’ earnings disappointed. [.T]

In contrast, share markets globally are in strong form and MSCI’s gauge of stocks across the world hit an all-time high on Thursday, posting its fourth consecutive record closing high.

The world benchmark was flat in Asian hours, while U.S and European futures were steady, with pan-region Euro Stoxx 50 futures gaining 0.08% and U.S. S&P 500 e-minis unchanged.

The gains came even after the U.S. Federal Reserve on Wednesday finally announced that it would begin tapering its massive asset purchase programme, though Fed Chair Jerome Powell said he was in no rush to hike borrowing costs.

“Even though it transpired as expected, it is a significant milestone, the direction of travel is now clearly towards policy normalisation, though the Fed emphasised that tapering is not tightening,” said Stefan Hofer, chief investment strategist for LGT in Asia Pacific.

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“It was really expert communication and very well handled”

Hofer said U.S. jobs data would remain in focus in the coming months as that would influence upcoming decisions from the Fed. U.S. payroll data for October is due later on Friday.

Back in Asia, Hong Kong weighed on the regional index, falling 1.25%, pressured by index heavyweight HSBC as the rate sensitive bank’s shares tumbled 5%, hurt by the BoE’s dovish call, as well as by property stocks.

Also in Hong Kong, trading in shares of Chinese developer Kaisa Group Holdings Ltd was suspended, a day after the company said a subsidiary had missed a payment on a wealth management product, the latest sign of a deepening liquidity crisis in the Chinese property sector.

An index tracking Hong Kong listed mainland Chinese developers slipped 2.4 %, and an onshore China property index lost 2%.

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More broadly, Shanghai shares lost 0.6% though Chinese blue chips slipped 0.3%.

While investors were happy with the Fed’s communications, several felt that they had been misdirected by policymakers at the BoE, which surprised markets by deferring an interest rate hike at a meeting Thursday.

On Friday, the pound was nursing its wounds near a month low having tumbled 1.36% the previous day following the central bank’s decision, which also roiled bonds in Britain and across Europe more broadly.

The dollar index last stood at 94.327, within sight of October’s 12-month highs, after the U.S. currency also gained ground on the euro.

Alongside the moves in European government bonds, the U.S. yield curve steepened on Thursday and U.S. benchmark 10-year yields dropped to 1.509%, their lowest level since mid-October.

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Yields later recovered some ground, and 10-year notes last yielded 1.5386%.

Oil reversed course and gave up some of Friday’s early gains.

U.S. crude rose 0.34% to $79.05 a barrel, while Brent crude lost 0.1% to $80.44 per barrel, back near month lows hit a day earlier following a report that Saudi Arabia’s output would soon surpass 10 million barrels per day for the first time during the COVID-19 pandemic.[O/R]

Spot gold tacked on 0.1% as the falling yields provided support to the non-interest bearing asset.

(Editing by Shri Navaratnam and 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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