Aurelia Butler

SINGAPORE (Reuters) – Asian stock markets nudged sideways on Tuesday while the dollar took a breather, its recent gains chastened by resistance from central banks in China and Japan and by traders waiting on U.S. inflation data to signal that interest rates may have peaked.The yen notched its best day against the dollar in two months overnight, after Bank of Japan Governor Kazuo Ueda said policymakers might have enough economic information by year’s end to determine that short-term rates will need to rise.The yuan had its best day in six months after authorities vowed to correct one-way moves and Reuters reported the central bank had stepped up scrutiny of dollar buying.Both, however, remain near their weakest levels of the year and with the yuan at 7.3022 per dollar in offshore trade and the yen last a little off Monday highs at 146.68 per dollar. [FRX/]Japanese government bonds remained under pressure on Tuesday, with 10-year JGB yields up 1 basis point to a fresh high of 0.71%. [JP/]”The result of Ueda’s comments was an intense move higher in Japanese swaps and government bond yields,” said Chris Weston, head of research at brokerage Pepperstone in Melbourne.”(It) is certainly constructive for yen longs. (But) I refrain from getting too excited at this stage…where the actions are more of a medium-term issue – we won’t get the outcome of the spring wage negotiations until April 2024.”MSCI’s broadest index of Asia-Pacific shares outside Japan was flat. Japan’s Nikkei rose 0.3%, with markets looking to U.S. inflation data and this week’s European Central Bank meeting to set interest rate expectations and the mood. Due on Wednesday, markets are expecting the U.S. figures to show annualised core inflation falling to 4.3% in August though the headline number is seen ticking up to 3.6%.”A lower-than-expected print may slow the U.S. dollar’s rise while higher print could potentially un-nerve risk sentiments as it would reinforce market expectations for further rate hikes, and this could fuel dollar strength,” said OCBC strategist Christopher Wong.Interest-rate futures markets are pricing about a 45% chance of another U.S. rate hike by year’s end.Investors’ appetite for risk is also to be tested this week when British chip designer Arm Holdings lists in New York with a goal of raising almost $5 billion. Overnight, the weaker dollar and upgrade on Tesla (NASDAQ:TSLA) from analysts at Morgan Stanley helped U.S. stock markets gain. Tesla rose 10%. The S&P 500 rose 0.7%.In early Asia trade, U.S. futures slipped 0.2%.Elsewhere in currency trade, the Australian dollar was weighed by a further slip in consumer sentiment, which has been below the neutral 100 mark since March 2022 – the longest streak since a recession in the early 1990s.The Aussie, which bounced on Monday with gains in the yuan, was last down 0.1% at $0.6424. The New Zealand dollar also dipped 0.1% to $0.5911. [FRX/] The euro gained on the dollar overnight but moves have been muted with investors dialling back long euro positions ahead of Thursday’s ECB meeting. Pricing implies about a 56% chance that policymakers leave rates on hold.”There is a sense that ECB is already done for the cycle,” said Maybank analysts in a note to clients.”Recent PMI prints suggest that growth outlook could be deteriorating and puts the euro at risk of further downside. This is all the more amplified by lingering expectations for the Fed to hike further.”Benchmark 10-year Treasury yields were steady at 4.2980%. [US/]In commodity markets, Brent crude futures were steady at $90.59 a barrel. Gold hung on at $1,921 an ounce, while bitcoin was out of favour and dropped below $25,000 for the first time in three months. More

China is set to become the world’s biggest car exporter this year, overtaking Japan. The watershed moment will mark the end of decades of dominance by European, American, Japanese and South Korean groups.Yet driving China’s global ascendancy are deep structural problems in the domestic auto industry, which threaten to upend car markets across the world.A stark mismatch between production at Chinese factories and local demand has been caused, in part, by industry executives mis-forecasting three key trends: the rapid decline of internal combustion engine car sales, the explosion in popularity of electric vehicles and the declining need for privately owned vehicles as shared mobility booms among an increasingly urbanised Chinese population.The result has been “massive overcapacity” in the number of vehicles produced in factories across the country, said Bill Russo, former head of Chrysler in China and founder of advisory firm Automobility. “We have an overhang of 25mn units not being used,” he said.Years of supportive industrial policy and private sector investment have boosted China’s competitiveness in the industry. Domestic manufacturers, including EV champion BYD, are now outselling foreign automakers and targeting overseas markets for growth.China’s annual vehicle exports, which surpassed those of South Korea in 2021 and Germany in 2022, are now on track to beat Japan’s this year, according to Moody’s data. However, sales volumes in China peaked in 2017, data from Automobility shows, in line with slowing growth in the country’s middle-class boom and wider economic weakness.

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The overcapacity problem is hitting both local companies such as Chery, SAIC, BYD, Geely and Changan, and an increasing number of foreign groups. Companies including Tesla, Ford, Nissan and Hyundai are among those repositioning their Chinese factories towards export markets, analysts said. As of the end of July, 2.8mn vehicles had been exported from China this year, including 1.8mn petrol-powered vehicles — up 74 per cent on the previous year — as more domestic consumers opt for EVs and second-hand cars. Despite overcapacity and slowing sales growth, the expected wave of consolidation in China’s auto industry has not yet materialised, according to one senior western auto executive. This was partly because financial support from Chinese local governments and banks had helped keep unprofitable companies afloat, he said. “You have some 100 manufacturers who put 80 to 100 models on the market every year . . . we have been expecting that consolidation to have taken place already, and it didn’t,” the executive said.

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South Korea’s Hyundai is emblematic of the pain felt by legacy auto groups in China. Of the group’s four factories there, two are being used for exports and the other two are up for sale.“But the thing is, where can it sell its cars made in China? It already has plants in India, Vietnam, Indonesia and Brazil,” said Lee Hang-koo, executive adviser at the Korea Automotive Technology Institute.“Because of the low utilisation rates in China, its losses there have ballooned in recent years and it won’t be easy to make money out of exports as most of the cars produced there are gasoline cars,” he added.Hyundai declined to give more details on its strategy in China. Analysts expect China to hold its top position for years. According to forecasts by consultancy AlixPartners, overseas sales of cars produced by Chinese companies will hit 9mn by the end of the decade, pushing their global market share to 30 per cent in 2030, up from 16 per cent in 2022.Chinese auto exports have mostly targeted developing markets in Europe and Asia, Automobility data shows, with sanctions-hit Russia the top destination this year. Geely’s Coolray crossover is one of the most popular models exported to Russia and sells for about Rbs1.4mn ($14,000).The export wave is expected to intensify as Chinese EVs, which are significantly less expensive than rivals, gain a foothold, especially in Europe, said Yuqian Ding, a Beijing-based analyst with HSBC.Tesla already exports electric cars from its Shanghai facility to Europe and about one-fifth of all EVs sold in Europe are manufactured in China.

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BYD is spearheading China’s EV exports into developed markets. Following a recent briefing with BYD founder and chair Wang Chuanfu, Citi analysts said the company was “confident” of an export sales target of 400,000 units next year, double this year’s forecast.The Warren Buffett-backed Tesla rival, which is also one of the world’s biggest battery makers, told the bank’s analysts that the Chinese EV industry was three to five years ahead of foreign legacy automakers in terms of technology and scale, and as much as 10 years ahead in terms of cost advantage.

Still, analysts have warned that companies exporting from China must navigate worsening geopolitical tensions and limited brand recognition as well as rising protectionism and consumer nationalism.“How long will the rest of the world tolerate massive imports from China, and will Chinese companies come under pressure to relocate production overseas?” asked Christopher Richter, autos analyst at CLSA. Additional reporting by Gloria Li in Hong Kong and Peter Campbell in Munich More

(Reuters) -Walt Disney and Charter Communications (NASDAQ:CHTR) said on Monday they have reached a deal that will see the media giant’s networks, including ESPN, return to the Spectrum cable service just hours before the start of NFL “Monday Night Football.”News of the potential deal eased some fears that the traditional cable TV bundle, long a profit-engine for mediacompanies, could be nearing its end, sending shares up over 2% across the industry.The agreement gives Charter new tools to combat so-called cord-cutting where viewers ditch pay-TV for Internet-delivered options, while furthering Disney’s goal of growing its video streaming business, executives said.”Both our companies threw out the traditional playbook and focused on the consumer,” Disney Entertainment Co-Chairman Dana Walden said in an interview.ESPN, FX and other Disney channels disappeared from Charter’s cable service on Aug. 31 after the companies failed to reach an agreement over channel fees and how to package them. It deprived nearly 15 million subscribers to Charter’s Spectrum TV service access to the U.S. Open tennis tournament, college football and other programming.But what was a routine dispute in previous years became a referendum of sorts on the future of TV as the media business is squeezed by a decline in cable TV subscribers while newer subscription streaming services launched to combat Netflix (NASDAQ:NFLX) struggle to reach profitability. Charter’s Winfrey described the pay-TV business as being “on the edge of a precipice” as the industry has lost 25 million customers over the last five years. He sought greater flexibility in the packages it sells to customers, and the ability to offer the ad-supported version of Disney+ at no additional fee to Spectrum subscribers.Maintaining cable TV revenue is also critically important to media companies like Disney, as they invest resources in streaming services that have yet to break even. COMPROMISEUnder the new agreement, Charter will be able to offer subscribers to its most popular video package, Spectrum TV Select, access to the ad-supported version of the Disney+ service at no additional cost, one of its key demands in negotiations.However, Charter will pay Disney a wholesale fee to do so, similar to an agreement Disney struck with Verizon (NYSE:VZ) in 2019, when the telecommunications giant offered its mobile phone customers a year’s free access to Disney+.Charter also will provide the ESPN+ streaming service to customers who subscribe to its sports-focused Spectrum TV Select Plus plan at no additional charge. Once Disney’s flagship ESPN network is available as a streaming service, it also will be available to Spectrum subscribers.ESPN will be distributed to 85% of Spectrum cable TV subscribers, a number that would drop to 80% when the sports network is offered as a streaming service, according to one person familiar with the matter. As part of the agreement Charter also will begin offering to sell subscriptions to Disney’s ad-free streaming services, Disney+, Hulu, ESPN+ and Disney’s bundle, to its 30.6 million broadband customers.”We believe that today’s deal reflects a trade-off from linear economics,” wrote Michael Morris, analyst with Guggenheim Securities Equity Research, using industry terminology for the traditional TV business. “But positions both Disney and Charter to drive value amid the shift toward streaming in the digital future.”Rich DiGeronimo, Charter’s president of product and technology, hailed the agreement with Disney, saying, “we do think (this) does provide the opportunity to stem video cord-cutting.”Spectrum will no longer carry Baby TV, Disney Junior, Disney XD, Freefor, FXM, FXX, Nat Geo Wild or Nat Geo Mundo.Walden said the programming from these cable channels, which target specific demographics, will ultimately reach viewers through Disney’s various streaming services. Disney shares rose 1.7% while Charter was up 2.4%. Rival media companies Warner Bros Discovery (NASDAQ:WBD) and Paramount Global gained 2.3% and 2%, respectively. More

TOKYO (Reuters) -Bank of Japan policymakers are increasingly talking up the need to shift away from the massive monetary stimulus of the past decade, even as growing global risks heighten concerns about a fragile economic recovery.A series of hawkish comments by BOJ speakers in recent weeks suggest the bank is preparing markets for an eventual policy change amid growing price pressures in deflation-prone Japan, analysts say.Even dovish members of the BOJ board have expressed an openness to talk about a long-awaited exit from the extremely accommodative policy of former governor Haruhiko Kuroda, acknowledging changes in conditions may warrant a tweak in monetary settings.Governor Kazuo Ueda told a newspaper interview on Saturday the BOJ could get enough data by year-end to judge whether conditions are in place to raise short-term interest rates.Ueda’s remarks, which pushed up the yen and bond yields on Monday, followed those of BOJ board member Naoki Tamura last month that suggested the bank could safely hike short-term rates without hurting the economy.”Even if the BOJ were to end negative rates, it won’t be scaling back monetary easing as long as it can keep interest rates low,” said Tamura, a former commercial bank executive.The commentary contrasts in tone to the pro-growth posture adopted under Kuroda, an advocate of aggressive monetary easing to shock Japan out of its deflationary mindset.It also suggests the BOJ under Ueda will be more inclined to prioritise unwinding the Kuroda-era policy framework, which has been blamed for distorting bond markets and crushing bank margin.”The BOJ will proclaim that Japan has achieved 2% inflation and end negative rates in April,” said Mari Iwashita, chief market economist at Daiwa Securities and a veteran BOJ watcher.To be sure, the BOJ is in no rush to phase out stimulus until there is enough data suggesting the economy can withstand the impact of weakening global demand and allow firms to keep hiking wages, say three sources familiar with its thinking.But growing signs of change in Japan’s deflation-prone economy are making policymakers more open to discussing the hurdles for an exit, a sign they see decision-time approaching.Inflation has exceeded the BOJ’s 2% target for more than a year as companies pass on higher costs to households. Firms also offered the largest pay hikes in three decades.Even doves in the nine-member board have noted these changes.”I believe Japan’s economy is finally seeing early signs of achieving the BOJ’s 2% inflation target,” said Hajime Takata, one such board member.”We need to patiently maintain the current massive monetary stimulus. At the same time, we need to respond nimbly against uncertainties as we’re seeing early signs of a positive cycle emerge” between wages and inflation, he said.Another board member, Junko Nakagawa, laid out the conditions for ending negative rates, notably a continued improvement in household confidence.”When we see many people share prospects that wages will keep rising, we may be able to exit (negative rates).”NO PRE-SET TIMINGSince taking the helm in April, Ueda has moved steadily toward phasing out stimulus. The BOJ tweaked policy in July to allow long-term rates to rise more reflecting higher inflation.The next step would be to ditch or hike a 0% target set for the 10-year bond yield, and raise short-term rates from -0.1%.Policymakers’ recent remarks suggest the BOJ could act sooner than markets expect. A majority of analysts polled by Reuters in August saw the BOJ scaling back stimulus only in a year’s time. Less than half expect negative rates to end in 2024.There seems to be no consensus within the BOJ board, however, on when or how the bank would dismantle Kuroda’s complex policy framework.Ueda said the BOJ could end negative rates if it believed that inflation would sustainably hold above the target.His deputy Shinichi Uchida appeared to set a higher bar for ending negative rates, saying last month there was “still a long way to go” before conditions were met.Next year’s wage outlook remains key.Japanese firms traditionally kick off their spring “shunto” wage negotiations with unions in March. But the BOJ could get information before those talks through its regional branch offices and comments from corporate executives on the wage outlook, the sources said.The global outlook would also be crucial with a downturn in the U.S. and Chinese economies hurting manufacturers and discouraging pay hikes, the sources said.”There’s so much uncertainty on the outlook for wages and Japan’s economy,” one of the sources said. “The BOJ probably doesn’t have a pre-set timing in mind on when it can take the next step.” More

ORLANDO, Florida (Reuters) -Hedge funds’ bearish view on the dollar is evaporating fast and at the current pace of buying they will be outright bullish by the end of the month. What’s more, recent history suggests that when funds go long dollars, they tend to stay long for a while. ‘Longer for longer’, if you like.The latest Commodity Futures Trading Commission (CFTC) data shows that funds cut their net short dollar position to $7.17 billion, the smallest bet against the dollar since mid-June and a third of what it was six weeks ago.It has halved in the last two weeks, and at the current pace the speculative community will be net long of dollars by the end of the month. This shift has coincided with the dollar’s rise to a six-month high against a basket of currencies. A short position is essentially a wager an asset’s price will fall, and a long position is a bet it will rise. Hedge funds often take directional bets on currencies, hoping to get on the right side of long-term trends. This is broadly reflected in CFTC positioning cycles. From May 2013 – when former Fed chief Ben Bernanke uttered his famous ‘taper tantrum’ remark – funds went net long dollars for an almost uninterrupted four-year stretch through June 2017, a bullish bet that peaked at a record $51 billion in late 2014. That was followed by a year being net short dollars, nearly two years of being net long, before swinging back to being net long for over a year. Funds have been net short of dollars since November last year. This suggests that although the dollar’s short-covering rally may not have much juice left in it, the greenback could find a solid source of long-term demand once the speculative community decides to turn outright bullish. Whether funds do will hinge largely on the interest rate outlook. There is a growing view that the Federal Reserve’s hiking cycle is over, which is intuitively negative for the dollar. But what matters is relative moves – changes in yields relative to current market pricing, and relative to other jurisdictions.And that is a mixed picture, especially given the latest developments in Japan. The two-year U.S.-Japanese yield spread remains around 500 basis points in favor of the dollar, around the widest level in over 20 years. A quicker tightening shift from the Bank of Japan than is currently priced in could move that dial rapidly.CFTC data show that funds are still holding a substantial net short yen position worth around $8.2 bln. Given that funds have been net short the Japanese currency since March 2021, there is potential for the yen to snap sharply higher.On the other hand, although CFTC funds cut their net long euro position to a seven-month low of 136,000 contracts, that is still a large $18 billion bet that the euro will appreciate. If the European Central Bank brings its rate-hiking cycle to a premature end – not an unreasonable assumption as growth forecasts are slashed and Germany is seen falling into recession – there is plenty of scope for funds to liquidate their euro longs. (The opinions expressed here are those of the author, a columnist for Reuters.) More