Aurelia Butler

SYDNEY (Reuters) – The dollar was in limbo on Tuesday as investors waited to see how U.S. economic data affected the chance of outsized rate cuts, while a rally in Japanese stocks helped staunch the bleeding in yen carry trades.The greenback was idling at 147.17 yen, having briefly touched a one-week high of 148.23 overnight before profit-taking emerged.The euro stood at $1.0931, after creeping higher overnight and nearer to resistance at $1.0944 and $1.0963. The dollar index was flat at 103.08.Producer price figures due later will provide an appetizer for the main inflation report on Wednesday, and could move markets since they feed through to the core personal consumption (PCE) measure favoured by the Federal Reserve.Forecasts are for a 0.2% rise in both the headline PPI and the core measure.More important will be the consumer price report and retail sales for July which could have a material impact on whether the Fed eases by 25 basis points or 50 basis points in September.Currently futures are evenly split on the larger move, having briefly priced it as a dead certainty last week when stock markets were in free fall.”A hot CPI and hot sales would be the most volatile scenario, and see the bond market quickly repricing back to a 25bp cut,” wrote analysts at JPMorgan in a note.”A cool CPI and cool sales could ease some concerns about the stagflation risks, but bring renewed recession concerns to the market,” they added. “We may see the bond market quickly react to this print pricing in 50bps or more of Sept cuts.”The former outcome would likely lift Treasury yields and support the dollar, while the latter would have the opposite effect. Recession talk, in particular, has tended to boost the yen and Swiss franc as safe havens.The futures market clearly still sees recession as a risk with 101 basis points of Fed easing priced in by Christmas, and more than 120 basis points for next year.That seems to sit at odds with much of the economic data which has the influential Atlanta Fed GDPNow estimate of growth running at an annual 2.9%.”The July CPI annual rates are expected at 3.0% y/y and 3.2% y/y for the core,” noted analysts at ANZ. “Although the trend is moderating, inflation is too high for the Fed to justify the market pricing 100bp of rate cuts between September and year-end.””A material deterioration in the data or intensified disinflation process would be required to deliver that.” More

The Westpac-Melbourne Institute index of consumer sentiment rose 2.8% in August from July, when it fell 1.1%. The index reading of 85 showed pessimists still far outnumbered optimists.”Consumers breathed a small sigh of relief in August as the RBA Board left interest rates unchanged and the support coming from tax cuts and other fiscal measures became more apparent,” said Westpac senior economist Matthew Hassan.In particular, a measure of family finances jumped 11.7% in August, the biggest monthly gain in nine years, with gains most strong among low-income earners, Hassan said. The Reserve Bank of Australia (RBA) held rates steady at its August policy meeting after debating whether or not to raise it further. It all but ruled out a near-term rate cut as core inflation is only projected to slow gradually. Markets are now wagering on an easing by the year-end, having only recently implied there was a risk of a further hike.The survey found the proportion of respondents expecting higher mortgage rates in the next 12 months fell 14.9% in August.The index measuring whether it was a good time to buy major household items bounced 0.6%, but remains historically low at 82.6. More

The trade ministry said it had adjusted its GDP growth forecast range for 2024 to 2.0% to 3.0%, from 1.0% to 3.0% previously.Economists in a Reuters poll forecast growth of 2.7% for the second quarter.On a quarter-on-quarter, seasonally adjusted basis, GDP expanded 0.4% in the April to June period, also matching the advance estimate.”On balance, Singapore’s external demand outlook is expected to be resilient for the rest of the year,” the trade ministry said, though it noted downside risks remained from any intensification of geopolitical and trade conflicts or if global financial conditions stayed tighter for longer than expected.”Against this backdrop, Singapore’s manufacturing sector is expected to see a gradual recovery in the second half of the year,” the ministry said.Last month, the Monetary Authority of Singapore (MAS), the central bank, said it expected the economy to strengthen over the rest of 2024, with growth coming in closer to its potential rate of 2–3%.For the whole of 2023, GDP grew 1.1%, slower than 3.8% in 2022.The MAS left monetary policy settings unchanged last month in its third review of the year as inflation pressures continued to moderate and growth prospects improved. More

Israel’s war on Gaza, triggered by the Islamist group Hamas-led cross-border attack on Oct. 7, has cost thousands of lives and unfolded into a humanitarian crisis.”In our view, the conflict in Gaza could last well into 2025 and there are risks of it broadening to other fronts,” the ratings agency said in a statement.”The downgrade following the war and the geopolitical risks it creates is natural,” Israeli Finance Minister Bezalel Smotrich said on X.Fears that the conflict in Gaza could turn into a broader Middle East war have escalated after the killing of Hamas leader Ismail Haniyeh in Iran and top Hezbollah military commander Fuad Shukr in Beirut.Israel’s shekel fell as much as 1.7% against the dollar on Monday and stocks ended over 1% lower in Tel Aviv as investors fret over a possible attack on Israel.Heightened tensions between Israel and Iran and its allies could imply significant additional military spending, destruction of infrastructure and damage to economic activity and investment, Fitch said.The ratings agency expects the Israeli government to permanently increase military spending by close to 1.5% of GDP versus pre-war levels as the country strengthens its border defenses. “Public finances have been hit and we project a budget deficit of 7.8% of GDP in 2024 and debt to remain above to 70% of GDP in the medium term,” Fitch said. It forecast the country’s debt will remain on an upward trend beyond 2025 if higher military spending and economic uncertainties continue. More

WASHINGTON (Reuters) – U.S. President Joe Biden supports the idea of eliminating taxes on tips for service and hospitality workers, the White House said on Monday.”Absolutely,” said White House spokesperson Karine Jean-Pierre, asked at a briefing if Biden would sign legislation doing so were it passed by Congress. “This is something that the president supports. He supports eliminating taxes on tips for service and hospitality workers,” as well as raising the minimum wage.The statement came after Vice President Kamala Harris, the Democratic presidential candidate, said in Nevada on Saturday that she supported eliminating taxes on tips, taking a similar position to her rival Donald Trump in an effort to win over service workers.That group is a large and politically influential constituency in the state, which is expected to be closely contested in the 2024 election.Support for the policy marks a rare area of agreement between the two major party’s presidential candidates.Harris’ version of the proposal – exempting tip income from federal income taxes and raising the minimum wage – could increase deficits by $100 billion to $200 billion or more over 10 years, according to the Committee for a Responsible Federal Budget.Some 2.2 million Americans worked as wait staff in 2022, according to the U.S. Labor Department, many drawing some of their income through tips.Trump, who told a rally in Las Vegas in June that he would seek to end taxation of income from tips, accused Harris of stealing his policy proposal.”Kamala Harris, whose ‘Honeymoon’ period is ENDING… just copied my NO TAXES ON TIPS Policy,” Trump said on his Truth Social app. “The difference is, she won’t do it, she just wants it for Political Purposes!”A Harris campaign official said her proposal would require legislation to be passed by Congress.”As president, she would work with Congress to craft a proposal that comes with an income limit and with strict requirements to prevent hedge fund managers and lawyers from structuring their compensation in ways to try to take advantage of the policy,” the official said. More

(Reuters) – A look at the day ahead in Asian markets. Markets looked a whole lot more placid on Monday, a week after equities plunged and volatility measures spiked, but intensifying geopolitical tensions and looming economic data threaten to disrupt the relative calm.The U.S. benchmark S&P 500 ended virtually unchanged on the day, as gains in Nvidia (NASDAQ:NVDA) and other tech stocks offset declines in most other sectors. The index is now down 5.7% from its July all-time high, recovering after being down 8.5% from its peak a week ago. MSCI’s gauge of stocks across the globe also was little changed on Monday.The Cboe volatility index was last at 20.71 points, falling during the session to its lowest point since the start of the month. The VIX a week ago logged its largest ever intraday jump and closed at over 38 points, its highest closing level since October 2020.Part of Monday’s calm may have stemmed from a market holiday in Japan, with the country’s Nikkei index and yen currency at the center of the latest global storm in markets.But investors were looking ahead: Wednesday’s U.S. consumer price index report will give a crucial read on inflation with markets now worried that an overly depressed CPI number will fan fears of a downturn. A weaker-than-expected jobs report was one of the catalysts for the recent market selloff, as some investors suspect the Fed may be too late in cutting interest rates.Tuesday’s report on U.S. producer prices provides an inflation-data appetizer ahead of Wednesday’s main course.Inflation also was top of mind in India, where data on Monday showed retail inflation fell in July to a near five-year low.Tensions in the Middle East were keeping markets edgy. The U.S. Defense Department said over the weekend it had ordered the deployment of a guided missile submarine to the Middle East as the region braces for possible attacks by Iran and its allies after the killing of senior members of Hamas and Hezbollah.Oil prices jumped on Monday, with U.S. crude settling up over 4%, on concerns the conflict would tighten global crude supplies. The U.S. presidential race was also a focus. Here are key developments that could provide more direction to markets on Tuesday:- Singapore GDP (Q2)- Japan corporate goods price index (July)- US producer price index (July) More