Aurelia Butler

SYDNEY (Reuters) – Australia’s government is expected to boast another surplus in its annual budget due on Tuesday, courtesy of strong employment and high commodity prices, giving it cash to afford more cost of living relief and industry incentives.Ahead of his third budget since the centre-left Labor government won power in 2022, Treasurer Jim Chalmers predicted inflation could ease to the central bank’s 2-3% target band by the end of this year, helped by measures Canberra plans to introduce to cool prices.That would be a welcome surprise for the Reserve Bank of Australia (RBA), which does not expect inflation to return to target until late 2025.”I think it is cost of living relief that they’re assuming kicks in to lower inflation,” said Shane Oliver, chief economist at AMP (OTC:AMLTF). “They’re not making any allowance for people possibly spending more on the back of that relief. Technically it might be alright, but it does run the risk of ignoring the spending effect.” The centrepiece of the budget would be an already legislated income tax cut for every Australian taxpayer worth A$395 billion ($260.58 billion) over 10 years. Chalmers is also likely to renew energy rebates that were set to expire this year.The budget will feature tax incentives for Labor’s Future Made in Australia subsidy programme to help domestic industries compete globally, as well as more defence funding and measures to cut costs for higher education.Chalmers is under pressure to curb spending to avoid stirring up inflation, but he has defended the measures as “unavoidable” and “warranted”. Australians are due to head to polls again by early next year.Three of the big four Australian banks expect the government to record a back-to-back surplus in the fiscal year ended June 30, a feat not achieved since the early 2000s.ANZ predicted a small surplus of A$4.5 billion for the 12-months ending June this year, while Commonwealth Bank of Australia (OTC:CMWAY) tipped a surplus of a A$15 billion. “The Budget will focus on providing targeted cost of living support and securing Australia’s economic and strategic future,” said Pat Bustamante, a senior economist at Westpac.”This comes with a price tag that will see the cumulative budget position deteriorate and the budget tip into the red.”Westpac expects a A$9.4 billion surplus this year, though that will likely swing to a deficit of $10.1 billion in 2024/25 in part as the cost of past borrowing mounts.($1 = 1.5158 Australian dollars) More

House prices in South Korea have been falling since June, 2023, as high interest rates weighed on demand, and worries about debt repayments at construction firms have grown after a mid-sized builder’s decision in December to reschedule its debt. “Despite the recent rise in delinquency rates of real estate project financing amid a sluggish property market, there have been limitations to sort out unprofitable projects for an orderly restructuring,” the Financial Supervisory Service said in a statement. The delinquency rate of real estate projects climbed to 2.70% by the end of last year, up from 1.19% a year before and 0.37% at end-2021, according to FSS. Under the new guidelines, which will come into effect from June, more loans and financial institutions will be subject to profitability assessments related to real estate projects with more detailed criteria for a better evaluation of risks. The FSS said it would also tighten its supervision of financial institutions to make sure they take follow-up actions on real estate projects over default risk after assessments. To help ensure a soft-landing for the real estate market, commercial banks and insurance firms have prepared a syndicated loan of one trillion won ($731.62 million). The funds will be used to ensure there is sufficient demand and liquidity during the restructuring process and the amount could be raised to a maximum of five trillion won if needed, the FSS said. ($1 = 1,366.8300 won) More

TOKYO (Reuters) – Japan is seeing conditions fall in place for the central bank to normalise monetary policy, ruling party heavyweight Katsunobu Kato told Reuters, underscoring growing political support for further interest rate hikes.But Kato said the Bank of Japan (BOJ) must keep a close eye on economic conditions and coordinate carefully with the government in working out when to raise rates.”Japan is shifting to an era where prices and wages rise, from one where both barely moved,” said Kato, a former chief cabinet secretary and a ruling party veteran seen by some analysts as a candidate to become future prime minister.”It’s therefore natural for monetary policy to revert to the original style in which interest rates move in positive territory reflecting market function,” he told Reuters in an interview on Friday.”Key to the decision on whether to actually raise interest rates is Japan’s economy, especially consumption, which isn’t necessarily strong.”When asked whether the yen was too weak, Kato said he was more concerned about the impact of the weak yen on inflation than its levels.”In the past two years, the public has clearly suffered from rising inflation,” he added.The remarks by Kato highlight the ruling party’s growing focus on the rising cost of living, driven in part by the weak yen, that may help the BOJ make the case to raise interest rates further.The BOJ ended eight years of negative interest rates in March on heightening prospects that inflation will durably hit its 2% target, helped by rising wages.Since then, the central bank has signalled that further rate hikes are likely, cementing market expectations of another increase in borrowing costs by year-end.Faster-than-expected rate hikes could slow the yen’s declines.The weak yen has inflated raw material import costs, in turn hurting consumption and creating headaches for policymakers looking to shore up a fragile economic recovery.The yen’s recent weakness reflected not just the wide interest rate differential between Japan and other countries, but structural changes in Japan’s economy, he said.With many Japanese companies having shifted production overseas, a weak yen no longer sparks a sharp rise in exports, he said, calling on the need for Japan to revitalise its economy by attracting investment from abroad. More

SYDNEY (Reuters) – Asian share markets made a cautious start on Monday in a week where inflation figures could make or break hopes for earlier U.S. rate cuts, while Chinese activity data will test optimism about a sustained recovery in the world’s No. 2 economy.Beijing has already reported a welcome pickup in inflation to an annual 0.3% in April, helping to soothe worries about a slide into prolonged deflation. Forecasts favour further gains in April retail sales and industrial output due on Friday.There are also reports Chinese authorities are laying the groundwork for a sale of 1 trillion yuan ($138.39 billion) in longer-dated bonds to help fund stimulus spending at home.The improved sentiment has helped lift Chinese blue chips to a seven-month high. MSCI’s broadest index of Asia-Pacific shares outside Japan was flat, having hit its highest in more than 15 months last week.Japan’s Nikkei eased 0.2%, still saddled with speculation further losses for the yen could lead the Bank of Japan to raise rates in the next few months.Much now depends on whether the U.S. April inflation report will show a moderation after three months of upside surprises. Median forecasts are for core consumer prices to rise 0.3% in the month, compared to 0.4% in March, pulling the annual rate down to 3.6%.So crucial are the data that rounding to the second decimal place could make all the difference.”Our unrounded core CPI forecast at 0.27% m/m suggests larger risks for a dovish surprise to a rounded 0.2% increase,” noted analysts at TD Securities.A low number would likely boost bets the Federal Reserve could ease as soon as July, which is currently priced at only a 25% chance. Equally, a high inflation print could push a rate cut out past September and challenge pricing for 42 basis points of easing this year.Also due are figures on U.S. producer prices, retail sales and jobless claims, along with final reports on European inflation that should reinforce expectations for a June rate cut from the European Central Bank. There are a host of Fed speakers this week to update markets on their thinking, including Fed Chair Jerome Powell who appears with the head of the Dutch central bank on Tuesday.UPBEAT US EARNINGSS&P 500 futures and Nasdaq futures were both little changed early on Monday, after rallying last week as company earnings came in strong. With 80% of the S&P 500 having reported results, companies are on track to have increased earnings by 7.8%, well ahead of the April expectation of 5.1%.Once Nvidia (NASDAQ:NVDA) reports on May 22, Magnificent Seven quarterly earnings are on track to jump 49%, according to Tajinder Dhillon, senior research analyst at LSEG.Companies reporting this week include Walmart (NYSE:WMT), Home Depot (NYSE:HD) and Cisco (NASDAQ:CSCO).Global share indices have also bounced to record highs in recent weeks, even as markets have scaled back some of their more aggressive wagers for rate cuts this year.”A straightforward interpretation of financial market performance is that there is more underlying strength in the global economy than had been anticipated and higher interest rates are reflecting rather than impeding global growth,” says Bruce Kasman, head of economic research at JPMorgan.”We lean in this direction as our 2024 growth and policy rate forecasts both move higher.”The relative outperformance of the U.S. economy continues to underpin the dollar, while only the threat of Japanese intervention is stopping it from re-testing the 160 yen barrier.The dollar was holding firm at 155.92 yen on Monday, while the euro was flat at $1.0770 having faced resistance around $1.0791 last week.Gold stood at $2,362 an ounce, after rising 2.5% last week on demand from momentum funds and talk of persistent buying by China. [GOL/]Oil prices faded late last week as U.S. gasoline and distillate inventories rose ahead of the start of the summer driving season. [O/R]Brent was down another 27 cents at $82.52 a barrel, while U.S. crude dipped 21 cents to $78.05 per barrel. More

TOKYO (Reuters) – Major currencies were steady on Monday with the dollar consolidating against peers, as market participants awaited U.S. inflation data to assess the prospects of interest rate cuts this year.After a softer-than-expected U.S. payrolls report for April and a Federal Reserve policy announcement, expectations have increased for rate reductions this year. Markets have priced in a 61.2% chance of some degree of rate reductions to begin at the Fed’s September meeting, with about 50 basis points of cuts in total expected, CME’s FedWatch Tool showed.But comments by Fed officials last week were varied as speakers debated whether interest rates were high enough. A jump in consumers’ inflation expectations, revealed in a survey on Friday, could further complicate the conversation. “The rise in inflation expectations likely reflects stalling disinflation progress and will do little to help cool price pressures,” wrote Westpac economists in a client note.With recent data indicating the economy is slowing, investors are looking to confirm how sticky inflation is.The market will have a chance this week, with inflation readings in the form of the producer price index (PPI) on Tuesday followed by the consumer price index (CPI) on Wednesday.Fed Chair Jerome Powell will also make an appearance on Tuesday at a meeting of the Foreign Bankers’ Association in Amsterdam.”For the wheels to truly fall off of the U.S. dollar, incoming data needs to point to disinflation, not just pockets of weakness here and there,” said Matt Simpson, senior market analyst at City Index.”If inflation data ticks higher again this month it will surely undo the work of softer growth and slightly weaker employment figures.”The dollar index, which measures the greenback against a basket of currencies, was mostly flat at 105.34, following its first weekly gain last week after two successive weeks of decline.The euro was unchanged at $1.0769 as the euro zone prepares for an inflation reading of its own on Friday.Sterling was firm at $1.2517, down 0.03% on the day. Data on Friday showed Britain’s economy grew in the first quarter by the most in nearly three years, ending the shallow recession it entered in the second half of last year.The yen weakened 0.11% to 155.91. The dollar has marched up after a 3% decline at the start of the month, its steepest weekly percentage drop since early December 2022, after two suspected interventions by Japanese authorities.While the market continues to be bearish on the Japanese currency, yen futures data from CFTC showed non-commercial short positions have fallen from 179,919 contracts on April 23, which was the most since June 2007.As the yen creeps lower, markets will be cautious of further intervention.China’s offshore yuan held steady around its lowest in a week at 7.2352.Data released over the weekend showed Chinese consumer prices rose in April while producer prices extended declines, signalling improvement in domestic demand as the government navigates challenges to shore up a shaky economy.The central bank also pledged to support economic recovery.In cryptocurrencies, bitcoin last rose 1.99% to $61,682.00. More

HONG KONG/NEW YORK (Reuters) -Fast-fashion giant Shein is stepping up preparations for a London listing after its attempt to float itself in New York faced regulatory hurdles and pushback from U.S. lawmakers, two people with knowledge of the matter said.The online fashion retailer plans to update China’s securities regulator on the change of the initial public offering (IPO) venue and file with the London Stock Exchange (LSE) as soon as this month, said one of them.Shein, which according to one of the sources was valued at $66 billion in a fundraising last year, started engaging with the London-based teams of its financial and legal advisors to explore a listing on the LSE early this year, said the source and a separate person familiar with the matter.The China-founded fashion company has also approached London-based fund managers for introductory meetings ahead of the planned float, said another source with direct knowledge of the matter.Shein and the LSE declined to comment. The China Securities Regulatory Commission (CSRC) did not respond to a request for comment. Shein confidentially filed for an IPO with the U.S. Securities and Exchange Commission in November, and approached the CSRC to seek Beijing’s nod in the same month, sources have said.The plan for a U.S. IPO is still officially on the table, but the Singapore-based company has been struggling to clear regulatory hurdles both in the U.S. and China, amid lambasts from U.S. lawmakers on alleged labour malpractices and lawsuits from competitors.The CSRC earlier this year informed Shein that the regulator would not recommend a U.S. IPO due to the company’s supply chain issues, said a separate source.While Shein is now gearing up for a London IPO, it still prefers New York as its listing venue and plans to keep its SEC application alive in case there is a change in the stance of U.S. regulators, said the second source. It may also pursue a secondary U.S. listing in New York following its London IPO when it deems the U.S. political climate to be more favorable, the second source added.The company has faced tougher-than-expected scrutiny from U.S. regulators in an election year. In a sign of the fraught nature of the application process, the SEC has yet to advance Shein’s IPO filing, said the two sources. The SEC did not respond to a request for comment. Shein’s plan to update the Chinese regulator on the London IPO would make it subject to Beijing’s approval under the new listing rules for Chinese firms going public offshore, said the first source and a separate source.The IPO, if it materializes, could be one of the largest globally this year, sources have said.CHINA REGULATORY NODFor London, it could mark a turnaround after companies such as U.K. chip designer Arm chose to list in New York to chase deeper pools of liquidity. So far this year, there have been just four U.K. IPOs out of more than 30 in Europe. Sky News reported in December, citing sources, that Shein’s chairman Donald Tang had met executives from the bourse and other stakeholders in the U.K. economy during a visit to London that month.Shein, known for its $10 tops and $5 biker shorts, has filed with the CSRC which subjects it to Beijing’s permission for an offshore listing despite having moved its headquarters from China’s Nanjing to Singapore in 2022, highlighting the limits of its efforts to present itself as a global rather than Chinese company.The group, which sells cheap fashion in more than 150 countries, does not own or operate any manufacturing facilities, relying instead on about 5,400 third-party contract manufacturers, mainly in China. That makes it subject to the CSRC listing rules, Reuters has reported. The rules are applied on “a substance over form” basis, giving the CSRC discretion on when and how to implement them, sources have said.Under the new rules, a host of other authorities such as the National Development and Reform Commission, which supervises foreign holdings in local firms, the cybersecurity regulator and others may get involved in approving offshore IPO applications.The Cyberspace Administration of China (CAC) has also been conducting a procedural cybersecurity review of the company’s data handling and sharing practices, mainly about information on its suppliers in China, as part of the IPO clearance process, said a separate source with knowledge of the matter.The CAC did not respond to a Reuters request for comment. More

BEIJING (Reuters) -China’s consumer prices rose for a third straight month in April, while producer prices extended declines, signalling an improvement in domestic demand, as Beijing navigates challenges in its bid to shore up a shaky economy.The closely watched numbers follow better-than-expected imports data for April, suggesting a flurry of policy support measures over the past several months may be helping consumer confidence.Consumer prices edged up 0.3% in April from a year earlier, data from the National Bureau of Statistics showed on Saturday, versus a rise of 0.1% in March and a Reuters poll forecast for an increase of 0.2%.”Strip out food and energy prices, and the consumer inflation data suggests a comeback in demand, especially in services,” said Xu Tianchen, senior economist at the Economist Intelligence Unit.Core inflation, excluding volatile food and fuel prices, grew 0.7% in April, up from 0.6% in March. Overall the consumer price index (CPI) rose 0.1% from the previous month, beating a forecast fall of 0.1% in the poll and reversing a drop of 1% in March.Most China watchers say Beijing still has its work cut out, though, and the momentum might prove unsustainable, as official surveys show cooling factory and services activity, while a lengthy housing crisis shows no sign of easing, boosting the case for more policy support.”Price hikes by utility companies is another potential driver,” Xu added.”The fiscal strains some local governments are facing affect the subsidies they receive, which could be forcing them to pass the extra cost on to households to make ends meet.”Officials are grappling with municipal debt of $13 trillion, and the State Council, or cabinet, has told heavily indebted local governments to delay or halt some state-funded infrastructure projects.”The prices data suggests that domestic demand is recovering, supply and demand continues to improve and the outlook for domestic demand and price recovery is optimistic,” said Zhou Maohua, a macroeconomic researcher at China Everbright (OTC:CHFFF) Bank.”However, consumer prices remain low and the industrial manufacturing sector is still under pressure, reflecting insufficient effective demand and that recovery in the sector is still not sufficiently balanced.” The producer price index (PPI) dropped 2.5% in April from a year earlier, easing from a slide of 2.8% the previous month but extending a 1-1/2-year-long stretch of declines.On Friday, China’s central bank said it would make monetary policy flexible, precise and effective and promote a moderate recovery in consumer prices to consolidate economic recovery.The comments in a quarterly monetary policy report follow remarks in April by the Politburo, a top-decision making body of the ruling Communist Party, that China will use policy tools, such as banks’ reserve requirement ratio (RRR) and interest rates, to prop up growth. “Considering the judgement of the Politburo meeting that ‘effective demand is still insufficient…’ the policy support should take advantage of the momentum, by strengthening expectation management and creating more consumption scenarios,” said Bruce Pang, chief economist China at Jones Lang LaSalle.Many analysts say China’s economic growth target of about 5% in 2024 will be a challenge to achieve without further policy support. More

(Reuters) – A look at the day ahead in Asian markets.Inflation data from the world’s three largest economies – China, the United States and euro zone – sets the tone for world markets this week, and Asia gets the ball rolling on Monday following the April figures out of Beijing at the weekend.The general market backdrop on Monday should be positive with a U.S. interest rate cut in September back on the cards, Wall Street revisiting recent peaks, European indexes at new highs, and China and Hong Kong pushing Asian stocks higher.Add in oil prices slipping to two-month lows and a steady dollar pushing down on currency market volatility, and financial conditions are broadly loosening. But much of that may be offset by the news that the Biden administration will announce new China tariffs on strategic sectors, including a major hike in levies on electric vehicles. The full announcement, expected on Tuesday, will maintain existing tariffs on many Chinese goods set by former President Donald Trump, and will also add new tariffs to semiconductors and solar equipment.As analysts at Morgan Stanley note, the inflationary impact of an escalating U.S.-China tariff war will fray nerves in global government bond markets. In truth, sentiment across all markets will likely be negatively affected.Figures on Saturday showed that consumer price inflation in China last month was a bit stronger than expected, but producer deflation deepened, an indication that pipeline price pressures remain firmly to the downside. Also on Saturday, figures showed that new bank lending in China fell more than expected in April while broad credit growth hit a record low, underscoring how sluggish the economic recovery is and the need for more action from Beijing to rev it up.The U.S. and euro zone inflation readings for April will be released on Wednesday and Friday, respectively, which investors hope will give a clearer picture of the interest rate path ahead in the coming months. Before that, investors in Asia have Indian inflation on their plates too. Economists polled by Reuters expect a slight cooling to 4.8% from 4.9% in March, which would be the lowest since June last year.While headline inflation has moderated recently, food prices, which account for nearly half the consumer price index basket, have remained elevated, squeezing household budgets.Inflation is expected to return to the Reserve Bank of India’s 4% target next quarter, also when the central bank is expected to cut rates, according to a Reuters poll. But growth is holding up well and the RBI may want to wait for the Fed to cut rates before moving, so as not to weaken the rupee which is languishing at record lows against the dollar. Money markets put a Q2 rate cut at around a 50-50 probability.  Here are key developments that could provide more direction to markets on Monday:- India CPI inflation (April)- Japan money supply (April)- Australia business confidence (April) (Reporting and Writing by Jamie McGeever; Editing by Josie Kao) More