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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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Buying the Omicron dip

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November 29, 2021

A look at the day ahead from Danilo Masoni.

Sell first, get answers later. With stocks near lifetime peaks, the Black Friday reaction to the new fast-spreading virus strain Omicron was hardly surprising.

But a weekend later, investors look heavily engaged in buying the dip, as markets take a more balanced view of risks attached to what the WHO called a “variant of concern”.

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After their ninth biggest drop ever on Friday, gains in crude prices topped 5% earlier in Asia and stock futures point to a solid bounce across Europe and America.

A South African doctor said patients with Omicron have “very mild” symptoms and investment houses don’t look to have budged that much. Credit Suisse, for example, made no portfolio changes, staying slight overweight on equities.

Perhaps more telling is that retail traders poured north of $2 billion into U.S. stocks on Friday, setting the second biggest daily inflow on record, per Vanda Research data.

Of course there are uncertainties and that will likely make for volatile days heading into the Christmas shopping season.

Understanding the level of severity of the variant “will take days to several weeks”, said WHO. And vaccine maker BioNTech needs up to two weeks to figure out whether the shot it makes with Pfizer needs to be reworked.

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So while Omicron has spread from Australia to the Netherlands and governments ban travel and mull lockdowns, markets may also gamble on central bankers turning more patient in their path towards rates normalisation.

Lots of speakers from the Federal Reserve and the European Central Bank are lined up for today. On Sunday, speaking about risks to the recovery, ECB’s Lagarde said: “We now know our enemy and what measures to take.”

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

* ECB speakers: Governor Lagarde, ECB board members AndreaEnria, Isabel Schnabel, Pentti Hakkarainen; ECB Vice PresidentLuis de Guindos * Euro zone consumer sentiment/inflation expectations * German preliminary CPI/HICP * Fed speakers: Chairman Jerome Powell, New York PresidentJohn Williams, Governor Bowman * Emerging markets: Kenya central bank meets; Turkey tradebalance and bank NPL ratios (This story refiles to fix chart)

(Reporting by Danilo Masoni; Editing by Saikat Chatterjee)

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UK regulator set to block Meta’s Giphy deal – FT

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November 29, 2021

(Reuters) -The UK competition regulator is expected to block Meta Platforms’ acquisition of online GIF platform Giphy in the coming days, the Financial Times reported https://www.ft.com/content/662c8e3f-4909-4bec-9131-c0237bb4897d on Monday.

The Competition and Markets Authority is set to reverse the deal in what would be the first time the watchdog has reversed a Big Tech acquisition, the report said, citing individuals close to the matter.

Meta Platforms and the regulator did not respond to requests for comment from Reuters sent outside working hours.

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The regulator had in October fined the U.S. social media giant Facebook, now Meta, 50.5 million pound ($67.35 million) for breaching an order that was imposed during an investigation into its purchase of the GIF platform, Giphy.

Facebook bought Giphy, a website for making and sharing animated images, or GIFs, in May last year to integrate it with its photo-sharing app, Instagram. The deal was then pegged at $400 million by Axios.

($1 = 0.7499 pounds)

(Reporting by Sneha Bhowmik in Bengaluru; Editing by Uttaresh.V)

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Evergrande shares fall after chairman cuts stake; Fantasia suspends trading

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November 29, 2021

HONG KONG (Reuters) – Shares in China Evergrande Group fell as much as 4.8% on Monday morning, after its chairman trimmed his stake in the cash-strapped property developer to raise about $344 million.

The group’s electric vehicle unit, China Evergrande New Energy Vehicle Group Ltd, also dropped more than 5% after it said the company was still exploring ways to pump capital into the unit with different investors.

Evergrande has been scrambling to raise capital as it grapples with more than $300 billion in liabilities and Chinese authorities have told its chairman, Hui Ka Yan, to use some of his personal wealth to help pay bondholders, sources have said.

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Evergrande failed to pay coupons totalling $82.5 million due on Nov. 6 and investors are on tenterhooks to see if it can meet its obligations before a 30-day grace period ends on Dec 6.

The developer disclosed late on Friday that Hui had sold 1.2 billion shares in the company at an average price of HK$2.23 each, lowering his stake in the Shenzhen-based real estate developer to 67.9% from 77%.

Once China’s top-selling developer, Evergrand’e troubles have hit the broader Chinese property sector with a string of debt defaults and credit rating downgrades of its peers in the last couple of months.

Fantasia Holdings suspended trading in company shares on Monday pending release of information. On Thursday, the developer said a winding-up petition was filed against a unit related to an outstanding loan.

(Reporting by Sumeet Chatterjee; Editing by Stephen Coates)

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