Aurelia Butler

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.Asian markets on Tuesday might take heart from Wall Street’s impressive late show on Monday, but with the dollar and U.S. Treasury yields continuing their relentless march higher, the bigger picture looks much more ominous.Add to that another wave of turbulence to rock the Chinese property sector and the yen sliding closer to 150 per dollar with still no intervention from Japanese authorities, and caution will probably suppress whatever risk appetite investors have.Global shares, as measured by the MSCI World Index, may only have dipped less than 0.2% on Monday but it marked the seventh decline in a row, the index’s worst run since late August-early September last year.The MSCI Asia ex-Japan index also fell by a heftier 0.7%.Wall Street’s three main indexes rose, however, and the S&P 500 and Nasdaq’s gains of 0.4% were particularly impressive given the latest leap in U.S. bond yields to new multi-year highs.The back end of the U.S. yield curve is where the action is – the 10-year yield rose 10 basis points on Monday to 4.55%, the highest since 2007. As analysts at Deutsche Bank note, this is also historically significant territory – the 10-year yield’s average going back to 1799 is around 4.50%.The 10-year inflation-adjusted ‘real’ U.S. Treasury yield is also breaking new ground, climbing further above the 2% level. Analysts at Barclays point out that rising long-term U.S. real rates, especially after a Fed policy meeting, put emerging market currencies under near blanket pressure.This largely played out on Monday – China’s yuan slid back to a two-week low – and the dollar’s broad value against a basket of major currencies hit its highest since November.The basic ingredients of a tightening in emerging market financial conditions are in place, and this is exactly what is underway. Goldman Sachs’ financial conditions indexes for China and emerging markets at large are the highest in almost a year.In China, meanwhile, the property sector is back under the spotlight after shares of property developer Evergrande tumbled 21% on Monday on renewed uncertainty about the firm’s debt restructuring. The broader property sector index fell 2.5%.Evergrande shares are virtually worthless, but the company is systemically important – it is the world’s most indebted developer and the property sector accounts for roughly a quarter of China’s economy.Recent headlines surrounding China’s trade disputes with major trading partners like the U.S. and European Union have been mostly negative, but there appears to be some progress in EU-China talks between EU trade commissioner Valdis Dombrovskis and officials in Beijing, even if they are only baby steps.Here are key developments that could provide more direction to markets on Tuesday:- Japan services PPI inflation (August)- Singapore manufacturing output (August)- Fed’s Neel Kashkari speaks (By Jamie McGeever; Editing by Josie Kao) More

(Reuters) – Schwab Asset Management on Monday said it cut fees on the Schwab High-Yield Bond ETF (SCYB) and the Schwab U.S. TIPS ETF, which offers exposure to inflation-protected Treasury securities, to just three basis points, or 0.03%, to attract investors.That brings the fees for those products to the same level as its other fixed income ETF products. Schwab’s high-yield bond offering, launched earlier this year, competes head-to-head with products like the SPDR Portfolio High Yield Bond ETF (SPHY). State Street (NYSE:STT) slashed fees on ten SPDR ETFs in August, including that high-yield bond product.”Investors continue to consistently rank the expense ratio at the top of the list of the factors they consider most important in owning an ETF,” said David Botset, managing director of equity product management and innovation at Schwab.Still, there’s a limit to how low fees can go.”As we get into the low single digits, it’s getting more challenging,” Bostet added. U.S. equity ETFs that 10 or 15 years ago cost an investor as much as 0.50% to own now have fees of a tenth of that, or even less, he said.Schwab doesn’t want these low-cost ETFs to end up as loss leaders for the company’s array of asset management products, Bostet said. “We’re confident we can still achieve a level of profitability” from scale, recouping in volume what is lost on pricing.Schwab has nearly $300 billion in ETF assets under management, out of more than $920 billion managed by Schwab Asset Management overall. More

NEW YORK (Reuters) – Hedge funds increased their bearish bets mainly on U.S. stocks last week when the major stock indexes plunged, Goldman Sachs showed in a report.The bank said its clients mostly added short positions while also getting rid of long positions. Among sectors, consumer discretionary, industrials and financials were the most net sold.”Hedge funds have been pressing U.S. shorts in five of the past six weeks, and this week’s notional short selling was the largest since Sept. 22,” Goldman Sachs’ prime brokerage team wrote.Hedge funds added short positions mainly in so-called macro products, including equity index and exchanged-traded funds, the bank said.Since the beginning of the year, short flows in U.S. stocks are up over 20%, another Goldman report showed.Goldman Sachs, as one of the biggest providers of lending and trading services through its prime brokerage unit, is able to track hedge funds’ investment trends.After a tumultuous week for stocks as Treasury yields hit 16-year highs, all three major U.S. stock indexes posted weekly losses, with the S&P 500 and the Nasdaq registering their largest Friday-to-Friday percentage drops since March.Goldman Sachs also said hedge fund managers decided to unwind risk last week, mostly by selling long equity positions. “This week’s notional de-grossing activity in Japan – long and short combined – was the largest since Dec. 21,” the bank said.The Bank of Japan maintained ultra-low interest rates on Friday and its pledge to keep supporting the economy until inflation sustainably hits its 2% target. More

The Federal Reserve initiated these measures in response to last year’s highest inflation spike in four decades. Economists had predicted that higher interest rates would lead to reduced spending and job cuts, potentially pushing unemployment as high as 7%. However, the reality has been different, with the economy showing unexpected resilience.This resilience is attributed to several factors. One key factor is the replenishment of supplies which has helped cool inflation. Economists believe that supply disruptions due to the pandemic and Russia’s invasion of Ukraine played a significant role in boosting inflation. As these disruptions are resolved and supplies increase, inflation has started to ease.Another contributing factor is the change in the job market. Since the Fed began raising rates last year, about 3.4 million people have started looking for work. This influx of job-seekers has brought the labor market into better balance, reducing pressure on companies to raise wages to attract and retain workers.Moreover, households and businesses have continued to spend despite high-interest rates. This is partly due to the significant savings from stimulus checks and enhanced unemployment benefits received during the pandemic.The Fed intends to keep borrowing rates at a peak well into 2024. However, if current trends continue, it may achieve a rare “soft landing” – taming inflation without triggering a deep recession. Such an outcome would be far different from past inflation spikes like those in the 1970s and early 1980s.Last week, the Fed’s policymakers revised their economic projections to show core inflation amounting to 2.6% by the end of next year, down from 4.2% now. At the same time, they expect unemployment to rise slightly to just 4.1%, lower than their June forecast of 4.5% for 2024. In parallel, the latest US jobs report reveals that 187,000 jobs were added to the American economy in August, slightly better than expected. This indicates that despite the Federal Reserve’s measures, the job market remains robust.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

Brian Jacobsen, Chief Economist at Annex Wealth Management, has suggested that attaining the Fed’s inflation goal might be delayed, especially if a prolonged government shutdown occurs. This perspective, coupled with recent market updates, was shared during a recent episode of a well-known finance-focused live show.Consumer spending, which saw a deceleration in the third quarter of 2023, is anticipated to be a major impediment in achieving the Fed’s inflation aim, according to Jacobsen. His analysis indicates that the slowdown in consumer spending may contribute to a longer timeframe for reaching the Fed’s inflation target.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

Russia has weathered western sanctions over the invasion of Ukraine, the oligarch Oleg Deripaska has said, admitting “surprise” at the country’s resilience after a war he thought would bankrupt the Kremlin.Deripaska, one of Russia’s richest men, told the Financial Times that Moscow had survived the effort to isolate its economy by developing new trade ties with the global south and ramping up investment in domestic production. The private sector, meanwhile, proved more robust than he had expected only months earlier. “I was surprised that private business would be so flexible. I was more or less sure that up to 30 per cent of the economy would collapse, but it was way less,” he said. “Yes, there is war spending and all this kind of subsidies and government support but still it’s a surprisingly low slowdown [ . . .] The private economy found its way to operate and to do so successfully.”Russia’s apparent resilience despite being cut off from global markets and supply chains has been a point of pride for President Vladimir Putin, who said last week that “the recovery stage for the Russian economy is finished” after “we saw off unprecedented external pressure”.Russia was hit hard in the wake of the full-scale invasion but has since succeeded in avoiding G7 sanctions on the vast majority of its oil exports. The IMF has forecast Russia’s gross domestic product will grow by 1.5 per cent this year and 1.3 per cent in 2024. Putin was more bullish last week, predicting 2.8 per cent growth this year, more than double the maximum his own cabinet predicted in April. A Rusal aluminium smelter in Sayanogorsk More

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