Aurelia Butler

TOKYO (Reuters) – The dollar soared to a two-week high against its major peers on Thursday, as a rout in Treasuries improved the currency’s allure due to both higher U.S. yields and demand for safe haven assets.The dollar pushed to a two-week top versus the euro and extended its rebound from a more than two-month low to sterling following a two-day, 15-basis point jump above 4.6% for long-term Treasury yields after more robust U.S. economic data and some poorly received bond auctions.The bond market rout has spooked investors, with equities globally sliding sharply this week, spurring a rush to the safest assets.The dollar index, which measures the currency against six major peers, including the euro, sterling and the Japanese yen, reached the highest since May 14 at 105.15 on Thursday, following a 0.5% advance in the prior session.The euro slipped to $1.0796 for the first time since May 14, and sterling sank to $1.2696, continuing its retreat after reaching $1.2801 on Tuesday for the first time since March 21.The yen, however, climbed off a four-week low of 157.715 per dollar from overnight to last trade at 157.505.Japan’s currency has been marching steadily lower this month, heading back toward the 34-year trough of 160.245 from a month ago, which spurred a rapid rebound that market players strongly suspect to have been two rounds of dollar-selling intervention by the Ministry of Finance and Bank of Japan.Expectations for Federal Reserve interest rate cuts this year have been pared back amid signs of sticky inflation, most recently with a surprise uptick in consumer sentiment in data on Tuesday.Revised U.S. GDP figures are due later in the day, followed on Friday by the main macro event of this week, the release of the Personal Consumption Expenditures (PCE) price index – the Fed’s preferred measure of inflation. “The deepening rout in the U.S. bond market is fast becoming the BOJ’s worst nightmare, necessitating hurried consideration about the appropriate level to intervene for a third time this year,” Tony Sycamore, senior analyst at IG, wrote in a report.”The bond market bogey is well-positioned to wrest deeper control of the broader market, particularly if upcoming growth and inflation data are on the firmer side of the ledger.” More

HONG KONG (Reuters) – Security was tight around Hong Kong’s High Court on Thursday ahead of verdicts against 16 democrats in a subversion trial critics say could have major repercussions for the opposition democratic movement and the global financial hub’s reputation. The verdict comes more than three years after police arrested 47 democrats in mass dawn raids at homes across Hong Kong, later charging them with “conspiracy to commit subversion” under a China-imposed national security law.Scores of police officers and vehicles patrolled the High Court area as prison vehicles began bringing the 16 defendants to court. Some supporters queued overnight to secure a spot.”I came because it’s a critical stage and a historical moment (for Hong Kong),” said a man surnamed Chiu, 35, who began waiting at midnight. “They (the democrats) all stood up for themselves and for Hong Kong people, hoping to make a change.”The criminal trial is the biggest ever against Hong Kong’s democratic opposition and is being closely watched internationally, with diplomats from the U.S., Britain and Europe having attended court proceedings. So far, 31 of the 47 democrats have pleaded guilty, while 16 maintain their innocence. Four defendants have become prosecution witnesses. Mass pro-democracy protests erupted in Hong Kong in 2019 over new security laws planned by Beijing, which democrats argued infringed on freedoms guaranteed when Hong Kong was handed back to China by the British in 1997.Known as the 47 democrats case, the charges centre around an unofficial pre-selection ballot in July 2020 that prosecutors called a “vicious plot” to paralyse government. The democrats maintain it was an unofficial attempt to select the strongest candidates for a citywide election in a bid to win a historic majority in Hong Kong’s legislature.High Court Judges Alex Lee, Andrew Chan and Johnny Chan are expected to deliver their verdict during hearings scheduled for Thursday and Friday, according to the judiciary website.Most of the accused have been detained for more than 1,000 days since Feb. 28, 2021, and were subjected to marathon bail hearings. Countries including the U.S. have criticised the trial as politically motivated, and have called for the accused to be immediately released. More

NEW YORK (Reuters) -The transition to faster trade settlements for securities in the U.S. has faced processing bumps although the switch has mainly been smooth, market participants said on Wednesday.On Tuesday, U.S. trading of equities, corporate and municipal bonds and other securities moved to a one-day settlement cycle (T+1) from two days (T+2), to comply with a rule change adopted in February by the U.S. Securities and Exchange Commission.Canada, Mexico, Argentina and Jamaica implemented T+1 on Monday.The shift in the world’s largest financial market is aimed at making market infrastructure more resilient, but investors and regulators braced for increased trade failures and other hiccups.The Securities Industry and Financial Markets Association (Sifma) said it was optimistic about the progress of the transition. “All T+1 implementation activities have been completed and appear to be operating normally,” the Investment Company Institute said in a statement. “The first day of trading under T+1 settlement went smoothly,” said William Coleman, head of U.S. ETF Capital Markets at Vanguard. “While there may be some increased risk of failed trades as firms continue to adjust to the new settlement regime, we expect most trades will settle successfully today.”An early indication came from data on trade affirmations, in which participants verify and agree on the trade details. The Depository Trust and Clearing Corporation said that as of Tuesday evening the rate of total trades affirmed was 92.76%, higher than Friday’s 89.59%.The higher the affirmation rate, the more likely trades are to be successfully settled.Settlement is the process of transferring securities or funds from one party to another after a trade agreement. It follows clearing and is handled by the Depository Trust Company, a subsidiary of DTCC.In Mexico, an executive from the main stock exchange BMV said the move would help boost transaction volumes.”The fact that the trade settlement period has been shortened by one day reduces the exposure of portfolios and generates collateral resources that brokerage firms can use,” BMV executive Jiyouji Ueda said.Stephane Ritz, a managing principal at consultancy Capco, cited delays overnight in processing and preparing some trades for settlement at the National Securities Clearing Corporation, a DTCC subsidiary. The issue has been addressed in a “very timely fashion” and orders have been caught up with, Ritz added.The delays caused a lot of apprehension, said John Oleon, managing director at prime broker Clear Street. “Now that we’ve had that issue last night people are going to be sitting on the edge of their seat.”DTCC cited some processing delays overnight which have been resolved. “We are processing transactions normally,” a spokesperson said in a statement.Wednesday was the first big test for Wall Street as trades executed Friday, when T+2 was still in place, and trades from Tuesday, the first day of T+1, were being settled, which was expected to lead to a rise in volume.Market participants expect more trade failures as the industry adjusts to the faster cycle. Research firm ValueExchange said on average market participants expect the fail rate to increase to 4.1% after T+1 implementation, from 2.9%.In Canada, T+1 changes were implemented successfully and are functioning as expected, despite some isolated delays, which were addressed, a spokesperson for TMX, owner of the Canadian Depository for Securities, said in an email.”In an era where everything is marked by immediacy, it no longer made much sense to continue with settlement mechanisms from the last century,” said Alejandro Felix from Mexico’s main association of stock exchange entities. More

(Reuters) -Salesforce forecast second-quarter profit and revenue below Wall Street estimates on Wednesday due to weak client spending on its cloud and enterprise business products, sending its shares down more than 16% after the bell. It expects revenue between $9.20 billion and $9.25 billion compared with estimates of $9.37 billion, according to LSEG data.Salesforce (NYSE:CRM)’s forecast pointed to clients scaling back spending as the possibility of higher-for-longer interest rates and elevated inflation prompt them to keep costs under control.The company guided its quarterly revenue in the single digits, the slowest pace in its history, according to analysts, indicating that the cloud firm’s growth has begun to slow after years of breakneck progress.Salesforce has been heavily investing in AI for months and integrating the technology into the workflows of its large suite of products to drive revenue and margins. “AI initiatives will take time to come to fruition and we are now wary about whether CRM will look to go back to M&A to drive inorganic growth,” said CFRA Research analyst Angelo Zino. Salesforce has used its cash pile for acquisitions, but a push for management changes by activist investors led to increased share buybacks, focus on profit and a dismantled mergers and acquisitions committee.The company’s first-quarter adjusted earnings per share jumped 44% to $2.44, higher than expectations of $2.38.Salesforce left its fiscal 2025 revenue forecast unchanged, but cut its operating margin expectations to 19.9% from its prior forecast of around 20.4%.”Despite Data Cloud’s promise, an uninspiring growth narrative and decelerating margin expansion have investors pumping the breaks on the global leader in application software,” Third Bridge analyst Charlie Miner said.Salesforce COO Brian Millham said the company continues to see elongated deal cycles and budget scrutiny by clients. The company reported first-quarter revenue of $9.13 billion, higher than a year ago but below expectations of $9.18 billion. It expects adjusted EPS between $2.34 to $2.36 per share in the second quarter, compared with estimates of $2.40. More

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(Reuters) – A look at the day ahead in Asian markets.A remarkably light economic data and events calendar in Asia on Thursday will allow investors to chew over the rise in U.S. and global bond yields that appears to be gathering pace, strengthening the dollar and tightening financial conditions.Unsurprisingly, risk appetite is suffering. The MSCI World equity index fell 1% on Wednesday and the MSCI Asia ex-Japan index slumped 1.6%, its biggest fall in six weeks. Hopes of a rebound on Thursday will have been tempered by Wall Street’s slide deep into the red too. Thursday’s regional calendar offers few major market-moving signals. Reserve Bank of Australia’s deputy governor Sarah Hunter is scheduled to speak, Australian home building approvals data will be released and Taiwan revises first quarter GDP.Friday’s calendar, by contrast, is packed with top-tier releases including Chinese PMIs, Tokyo inflation and India’s Q4 GDP, all of which precedes the main event of the week – U.S. PCE inflation for April.Investors have to navigate Thursday first though, and market waters are getting increasingly choppy.The 10-year Japanese Government Bond yield is now at 1.075%, the highest since late 2011 and up eight days out of the last nine.But these juicier yields aren’t doing much for the yen, which is sliding closer to 158.00 per dollar, where Japanese authorities are suspected to have intervened on May 1 selling dollars to support the domestic currency.Global yields, already significantly higher than Japan’s, are also rising. The 10-year U.S. Treasury yield jumped another seven basis points on Wednesday to 4.64%, the highest in a month, and the two-year yield briefly topped 5.00% again.U.S. yield spreads over other jurisdictions may not be widening much in the dollar’s favor, but they are staying wide enough to ensure the dollar remains investors’ currency of choice. The dollar index rose 0.5% on Wednesday, its biggest rise in a month. China bulls, meanwhile, might have been encouraged by the International Monetary Fund’s assessment on Wednesday of Asia’s largest economy. The IMF upgraded its 2024 and 2025 GDP growth outlooks by 0.4 percentage points to 5% and 4.5%, respectively. But the IMF was more cautious on the longer term outlook, warning that growth could slow to 3.3% by 2029 due to an aging population and slower expansion in productivity.More immediately, the economy’s strong performance in Q1 might have set the bar of expectations too high – China’s economic surprises index continues to fall and is now on the brink of turning negative. If China’s economic surprises index is grinding lower, however, Japan’s has fallen off a cliff. At the start of May it was +35.2, and on Wednesday it was -36.8, the lowest since January last year.Here are key developments that could provide more direction to markets on Thursday:- RBA deputy governor Sarah Hunter speaks- Australia home building approvals (April)- Taiwan GDP (Q1, revised estimate) More

The next UK government must negotiate an improved trading relationship with the EU as businesses face ever-higher costs from Brexit, one of the country’s biggest corporate lobby groups has warned. The British Chambers of Commerce said that tighter migration rules and rising costs and complexity of exports were throttling investment and growth at home. “We urgently need to get a better trading relationship with our closest neighbour,” said BCC director-general Shevaun Haviland. A constant addition of new EU rules was making life ever-harder for exporters and their suppliers, she told the FT. “We thought that after year one things would just get easier for people as they worked out what the problems were, but actually the changes just kept coming.” The concerns are part of a rising chorus of criticism about the impact of Brexit on businesses ahead of the UK’s general election on July 4. Both Labour and the ruling Conservatives have avoided focusing on Brexit, which is still seen as divisive among voters. Labour leader Sir Keir Starmer, whose party has a significant lead in opinion polls, is set to pursue closer trade and defence ties with the EU if he becomes prime minister. Starmer wants to “deepen” the UK’s relationship with the bloc, but will rule out rejoining the single market or allowing freedom of movement between Britain and EU, senior Labour figures told the FT last month. A majority of companies exporting to the EU told the BCC that selling into the bloc had become harder during 2023, with new border checks on plant and animal products also imposing punitive new costs, particularly on small firms. Haviland said that easing migration rules was one of the changes that would most help businesses: “Working with the EU to ensure that the movement of people for work is easier will absolutely benefit our businesses.” The UK voted to leave the EU in 2016 and officially exited in 2021, when the less comprehensive EU UK Trade and Cooperation Agreement came into force. The BCC’s comments echo rising concerns from business grandees, who are often freer to be more vocal in their criticisms.Sir Mike Rake, former chair of BT Group, KPMG and easyJet, said Brexit had been “the single biggest act of economic and reputational self harm in our modern history, compounded by an ideologically driven exit treaty which continues to damage our economy with increasing and unnecessary frictional trade and regulatory costs”. The next parliament “must face reality” and “move closer to the EU from an economic and political perspective, including reconsideration of joining the customs union and single market”, he last week told the FT’s City Network, a forum of senior executives and policymakers. “This would be the single most important step to restoring growth in trade and our reputation, influence and investability as a country,” he said. Andreas Utermann, former chief of Allianz Global Investors, agreed that Brexit was still damaging businesses. While Prime Minister Rishi Sunak’s government had reduced friction with Europe after the Boris Johnson and Liz Truss administrations, it had “failed to . . . demonstrate any tangible benefit to being outside the EU”, he said. Haviland stressed the BCC was not asking for the UK to rejoin the EU, which accounts for more than 40 per cent of British exports. “We’re not suggesting going back there, that’s done, we’re moving forward,” she said. More