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BANGKOK, Dec 2 (Reuters) - European Central Bank President Christine Lagarde warned on Friday that some European governments' fiscal policies could lead to excess demand, and that fiscal and monetary policies need to work in synch for sustainable, balanced economic growth. "Fiscal policies that create excess demand in a supply constrained economy might force monetary policy to tighten more than would otherwise be necessary," Lagarde said at a conference hosted by the Bank of Thailand and Bank for International Settlements in Bangkok. "We need higher investment and structural reforms to remove the supply constraints and ensure that potential output is not impaired by the changing global economy. "And in a world where external demand is more uncertain, we will also need to strengthen the domestic supply and demand through higher productivity growth," she said. Its rate on bank deposits was increased by 200 basis points to 1.5% in three months.
MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) lost 0.2% in early trade. Nonetheless, the index is set to rise 4.2% for the week, hovering around the highest level since September. "I think the rally can probably continue but in the short-term the payrolls are the one to watch closely." The Euro hit a fresh five-month high at $1.0539 while the Japanese yen also scaled a new three-month high against the U.S. dollar. The Aussie dollar dipped slightly to $0.6796, after blowing past major resistance at 68 cents in the previous session, on Fed pivot hopes and China easing its zero-COVID policy.
SYDNEY, Nov 28 (Reuters) - New Zealand is likely facing a "shallow" recession as interest rates need to rise further to tame inflation, a top central banker said on Monday, suggesting that a pause in the policy tightening streak was still a distant prospect. The recession during the global financial crisis lasted six quarters and led to a total fall in GDP of around 4 percentage points. Silk said higher rates were justified by rising inflation expectations in New Zealand and the strength of the labour market which is driving wages higher. "If you look at some of the peak indicators of peak rates, for the Fed for example, that's very similar to our latest OCR track as well. Fed members have generally projected rates could rise as far as 5.0 to 5.25%, with some even expecting a higher peak.
For the currency markets, it meant the 7-week sell-off in the dollar continued. "The dollar could stay pressured for a bit longer, but it's probably embedding a good deal of Fed-related negatives now," analysts at ING wrote. Overnight, MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 1.3%, while Japan's Nikkei (.N225) and South Korean shares (.KS11) both rose around 1%. In the oil market, prices were slipping toward a major support level established in September. Wednesday's post-Fed U.S. bond market moves had seen yields on 10-year notes drop to a huge 79-basis-point deficit relative to two-year yields.
Morning Bid: COVID vs RRR
  + stars: | 2022-11-24 | by ( Stella Qiu | ) www.reuters.com   time to read: +2 min
SYDNEY, Nov 24 (Reuters) - A look at the day ahead in European and global markets from Stella Qiu:Another central bank pivots. This has aided the risk-on mood in the market, with Asian shares mostly advancing and U.S. dollar broadly weaker. The minutes of the Fed's November policy meeting showed a "substantial majority" of policymakers reckon it will "likely soon be appropriate" to slow the pace of rate hikes. China's COVID infections hit a record high, with Beijing, which has the strictest rules, failing to contain the spreading virus. "In our view, ending zero COVID as soon as possible is the key to raising credit demand and bolstering growth."
SYDNEY, Nov 24 (Reuters) - Asian shares tracked Wall Street higher on Thursday, buoyed by signals the U.S. Federal Reserve may slow the pace of interest rate hikes and news of fresh economic stimulus from China, with the dollar failing to recoup losses. S&P 500 futures were up 0.2%, while Nasdaq futures <NQc1> rose 0.3%, after modest gains in U.S. stocks on Wednesday. "However, the minutes also reveal an emerging divergence of views among members about the peak rate, and uncertainty about the peak rate." In Japan, data on Thursday showed manufacturing activity contracted at the fastest pace in two years in November. Meanwhile, in China, COVID cases continued to surge, with the economic toll from mobility restrictions and lockdowns piling up.
"This is welcome news," Cardillo added, suggesting that "there's a possibility the Fed raises interest rates by 50 basis points in December and then takes a pause." Signs that decades-high inflation growth is beginning to ebb sent U.S. Treasury yields lower, supporting expectations that the Fed could ease its foot from the rate-hike accelerator. The dollar lost ground against a basket of world currencies as sunny economic data lured investors away from the safe-haven greenback. The dollar index fell 1.96%, with the euro up 1.55% to $1.0166. Gold prices jumped as the dollar dropped, reflecting hopes that the inflation data could rein in the Fed's hawkish stance.
[1/2] U.S. Dollar banknotes are seen in this illustration picture taken June 14, 2022. The yield on benchmark U.S. 10-year Treasuries dropped 23 basis points after the data to 3.9137%, S&P futures rose 3% and Nasdaq futures rose 4%. In currency markets the dollar sold off sharply, falling 1.75% against the rate sensitive Japanese yen to 143.64, while the euro climbed 1.2% to $1.016 a two-month high. Sky-high inflation has caused the Fed to raise rates aggressively this year, a process that has boosted the dollar and caused U.S. Treasuries and shares around the world to sell off sharply. U.S. crude oil futures were 0.1% higher at $85.93 per barrel, while Brent crude futures gained 1% to $93.58.
China is again grappling with a COVID surge, with the southern metropolis of Guangzhou reporting thousands of cases. Overnight on Wall Street, shares ended lower as Republican gains in midterm elections appeared more modest than some had expected. The U.S. dollar on Thursday held onto its most of its gains overnight against a basket of currencies. The yield on benchmark 10-year notes eased 6 basis points to 4.0866% while the yield on two-year notes edged 5 basis points lower to 4.5732%. U.S. crude oil futures eased 0.3% to $85.59 per barrel, while Brent crude futures fell by a similar margin to $92.37.
Banks and corporations use the market to manage interest rate risks and traders depend on it as reference for pricing other assets. To make a swap, market participants turn to a dealer or bank to facilitate the deal. DRAINEDPart of the issue is a lack of bond market supply. Last week, the RBA's head of domestic markets, Jonathan Kearns, noted the swaps market dysfunction. Nor are other swap markets globally seeing similar pressures.
Australia's east is in the grip of the fourth major flood crisis this year due to a multi-year La Nina weather phenomenon, typically associated with increased rainfall. Across New South Wales (NSW) state there were 103 flood warnings on Saturday. "We've had a couple of flood rescues…right now I am at a property east of Forbes helping move some horses. Along the Murrumbidgee River near the town of Wagga Wagga floods peaked on Friday at the highest level since 2010. All four of Australia's eastern states, Queensland, New South Wales, Victoria and Tasmania have been hit with floods this year.
SYDNEY, Nov 5 (Reuters) - Australia will launch a bid with Pacific nations to host the United Nations climate summit in 2026, its energy minister said on Saturday, as the new labour government seeks to position the country as a renewable energy powerhouse on the global stage. The government also reinstated the role of the Ambassador for Climate Change, appointing Kristin Tilley, who it said has over a decade of experience with climate change policy, to work with other countries to tackle the climate crisis. We're back at the International table," Chris Bowen, minister for climate change and energy, said of the bid for COP31 at a press conference in Sydney,"It's an opportunity to work closely with our Pacific family, and we will seek to co-host the bid with the Pacific to help elevate the case of the Pacific for more climate action." Australia has lagged developed countries on its climate action, with the former government of Scott Morrison resisting pressure to set more ambitious carbon emission targets at last year's Glasgow climate summit. Bowen is leading Australia's delegation to attend COP27 climate summit in Egypt from Nov. 6 to 18, the first such summit for the newly elected labour government that came into office in May.
HONG KONG, Nov 4 (Reuters) - China may soon shorten COVID-19 quarantine requirements for inbound travellers from the current 10 days to seven or eight days, sources familiar with the matter told Reuters on Friday. Such a move would follow China's decision in June to slash quarantine time for inbound travellers by half. Health officials at the time said the shorter incubation period of the Omicron variant allowed for shorter quarantine times. Travel in and out of China has plunged as the country pursues "dynamic COVID zero" policies that include mandatory quarantine and RT-PCR tests for travellers upon arrival. International flights to and from China are at a small fraction of pre-COVID levels.
Another aggressive rate hike to contain hot inflation when the Fed conclides its two-day meeting later is anticipated. For markets, the key question is whether the Fed will also signal it could slow additional rate hikes, in a so-called dovish pivot. European stock markets opened higher, but moved lower as the day wore on. U.S. stock futures, which provide an indication of how Wall Street will open, also lost some of their strength and were mixed , . The robust dollar retreated in October on speculation the Fed might indicate a slowdown in its aggressive tightening campaign.
For markets, the key question is whether the Fed will also signal it could slow additional rate hikes, in a so-called dovish pivot. European stock markets opened mostly firmer (.STOXX), Asian shares outside Japan rallied to a two-week high (.MIAPJ0000PUS) and U.S. equity futures pointed to a firm open for Wall Street , . Cummins expects the Fed to step down to a 50 bps hike in December. It fell 0.75% against the Japanese yen to 147.16 yen amid fears of intervention from authorities and thin liquidity. The robust dollar has pulled back in October on speculation the Fed might indicate a slowdown in its aggressive tightening campaign.
European markets looked set to extend the cautious optimism, with the pan-region Euro Stoxx 50 futures up 0.5%. However, traders are split on the size of the hike in December, with futures market pricing in a 44.5% probability of a 50-bps increase, according to CME's Fed tool. It fell 0.5% against the Japanese yen to 147.6 yen amid fears of intervention from authorities and thin liquidity. In commodities, oil climbed after industry data showed a surprise drop in U.S. crude stockpiles, suggesting demand is holding up. U.S. crude oil futures rose 1.4% to $89.65 per barrel, while Brent crude futures was up 1.2% at $95.82.
However, traders are split on the size of the hike in December, with futures market pricing in a 44.5% probability of a 50-bps increase, according to CME's Fed tool. Cummins expects the Fed to step down to a 50 basis point rate hike in December. That sparked a reversal in Treasury yields and lifted market bets on interest rates to above 5% next year. In commodities, oil climbed after industry data showed a surprise drop in U.S. crude stockpiles, suggesting demand is holding up. U.S. crude oil futures rose 0.5% to $88.93 per barrel, while Brent crude futures was up 0.4% at $94.98.
SYDNEY, Nov 1 (Reuters) - Australia's central bank on Tuesday stuck with a slower pace of interest rate rises for a second month while revising up its inflation outlook, saying more rate hikes would be needed as it struggles to keep the economy afloat while battling inflation. Reuters Graphics"The Reserve Bank has indicated a preference for 'normal' 25 basis point rate hikes," said Craig James, chief economist at CommSec. CLOUDY OUTLOOKThe RBA was the first central bank among developed nations to break with outsized interest rate hikes, warning that households were already under pressure with rate rises so far. The Bank of Canada slowed its pace of rate hikes, saying it was getting closer to the end of its historic tightening campaign. The European Central Bank, while hiking rates as expected, sounded a cautious note on the outlook.
Australia's central bank raises rates by 25 bp as expected
  + stars: | 2022-11-01 | by ( ) www.reuters.com   time to read: +2 min
SYDNEY, Nov 1 (Reuters) - Australia's central bank on Tuesday raised the interest rate by 25 basis points for a second straight month while revising up its inflation outlook, saying that more tightening will be needed ahead. It had surprised many in the markets last month by downshifting to a quarter-point rate hike, following four consecutive moves of 50 basis points, citing an already substantial rise in rates. "The Board expects to increase interest rates further over the period ahead. "The Board recognises that monetary policy operates with a lag and that the full effect of the increase in interest rates is yet to be felt in mortgage payments." The local dollar edged 30 ticks lower after the rate decision, while markets have reduced the expected peak for cash rates to around 3.9%.
Australia's budget to downgrade growth, keep spending in check
  + stars: | 2022-10-24 | by ( ) www.reuters.com   time to read: +2 min
SYDNEY, Oct 25 (Reuters) - Australia's Labor government will unveil its first budget on Tuesday as economic growth slows both at home and abroad, emphasizing its spending will focus on easing the cost-of-living crisis without lighting a fire under already high inflation. In an interview with ABC Radio Brisbane on Monday, Chalmers reiterated that fiscal prudence will underpin its spending plans. Domestically, the slackening growth also reflects the worldwide phenomenon of sky-high inflation rates, which have cut into household spending and overall consumption. The budget will have some substantial measures around childcare, paid parental leave and wage growth, Chalmers said in the ABC Radio interview. The budget deficit will be much smaller than first feared thanks to high prices for many of Australia's major commodity exports and a surprisingly strong labour market.
Banknotes of Japanese yen and U.S. dollar are seen in this illustration picture taken September 23, 2022. Yen overnight volatility surged to its highest since Sept. 21, the day before the BOJ stepped in to prop up the currency for the first time since 1998. Sterling see-sawed on news former prime minister Boris Johnson had dropped out of the Tory leadership contest, and was last up 0.1% at $1.1319, off an overnight high above $1.14. Johnson said he had withdrawn from Monday's contest to replace Liz Truss, who was forced to resign as prime minister after launching a fiscal plan that unleashed turmoil in UK markets. Former Chancellor Rishi Sunak has emerged as the clear frontrunner to become Britain's next prime minister.
Banknotes of Japanese yen and U.S. dollar are seen in this illustration picture taken September 23, 2022. REUTERS/Florence LoSINGAPORE, Oct 24 (Reuters) - Suspected Bank of Japan (BOJ) intervention gave only brief respite to the Japanese yen as the dollar stayed strong on Monday, while sterling wavered as former finance minister Rishi Sunak emerged as frontrunner to become Britain's prime minister. That triggered a rally of more than 7 yen for the Japanese currency to 144.50 per dollar. Damien Boey, chief macro strategist at Sydney-based investment firm Barrenjoey, said the Japanese yen was still not close to fair value. Sterling also see-sawed on news former prime minister Boris Johnson had dropped out of running for British prime minister and was last up 0.2% at $1.1320, trimming earlier agains.
Australia aims for 'responsible' budget after UK mayhem
  + stars: | 2022-10-21 | by ( Wayne Cole | ) www.reuters.com   time to read: +4 min
Register now for FREE unlimited access to Reuters.com Register"So a premium for us is getting that balance right. Investors seem reassured, so far, with no hint of the havoc that wrecked the UK gilt market. He has also flagged steep downgrades to forecasts for global growth as central banks around the world hike interest rates. This is a major reason Australia is one of only eight nations that can boast a triple-A credit rating. "Small budget deficits will also help net debt decline as a share of GDP, adding comfort to Australia's AAA credit rating."
MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) edged up 0.2%, but further gains were capped by slight falls in Chinese shares. Japan's Nikkei (.N225) advanced 0.4%, Australia's resources-heavy shares (.AXJO) gained 0.4%, while South Korea (.KS11) rebounded 0.5%. Register now for FREE unlimited access to Reuters.com RegisterU.S. S&P 500 futures rose 0.8% and the Nasdaq futures jumped 1.3%. Netflix Inc (NFLX.O) reversed customer losses that had hammered its stock this year and projected more growth ahead, sending shares 14% higher in after-hours trading. Chris Turner, global head of markets at ING, said a quiet week for U.S. data could also see the dollar correction extend a little.
SYDNEY, Oct 18 (Reuters) - The Reserve Bank of Australia expects to raise interest rates further over the coming months, the deputy governor said on Tuesday, noting that the bank can achieve a similar tightening in rates to its global peers through smaller hikes. "This is a particular advantage in uncertain times, as it allows more frequent evaluation of the evidence and recalibration if necessary," said Bullock. Register now for FREE unlimited access to Reuters.com Register"It also means that if we increase interest rates at every meeting, we can potentially move much faster than overseas central banks." "The Board expects to increase interest rates further over coming months. But the pace and timing will be determined by the economic data," Bullock said.
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