Economy

SYDNEY (Reuters) – Asian shares bounced on Monday ahead of a week packed with earnings and a trio of central bank meetings that could see the United States and UK open the door to easing, while Japan might lift borrowing costs in a step toward “normality”. Also due is the U.S. jobs report for July, closely watched surveys on U.S. and global manufacturing, along with Eurozone gross domestic product and inflation data. The U.S. Treasury will outline how much bonds it plans to sell for the quarter, while China’s politburo meeting could reveal more stimulus following surprise rate cuts last week.After a benign June inflation report, markets are wagering the Federal Reserve will lay the groundwork for a September rate cut at its policy meeting on Wednesday. Futures are fully priced for a quarter-point easing and even imply a 12% chance of 50 basis points, and have 68 basis points of easing priced in by Christmas.”The FOMC is set to hold steady but is likely to revise its statement to hint that a cut at the following meeting in September has become more likely,” wrote analysts at Goldman Sachs in a note.”We now see the risks to the Fed path as tilted slightly to the downside of our baseline of quarterly rate cuts, though not quite as much as market pricing implies.”The Bank of Japan also meets Wednesday and markets imply a 70% chance it will hike rates by 10 basis points to 0.2%, with some chance it could move by 15 basis points.Investors are less sure whether the Bank of England will ease at its meeting on Thursday, with futures showing a 51% probability of a cut to 5%. The prospect of higher borrowing costs in Japan has been a drag on the Nikkei which shed 6% last week as the yen rallied. Early Monday, the index did manage a bounce of 2.2%, following a firmer finish on Wall Street.MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.4%, after losing 2% last week.S&P 500 futures added 0.4%, while Nasdaq futures rose 0.6%.Around 40% of the S&P500 by market worth report this week, including tech darlings Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN) and Facebook-parent Meta Platforms (NASDAQ:META).Expectations are high so any hint of disappointment will test the mega-caps’ sky-high valuations.”With some sizeable moves implied by the options market for the individual names on the day of reporting, movement at a stock level could resonate across other plays within their sector and potentially promote volatility,” said Chris Weston, head of research at broker Pepperstone.”Company earnings don’t come much bigger than Microsoft, where the options market implies a move (higher or lower) of 4.7% – the after-market session on Tuesday could get lively.”In currency markets, the Japanese yen was giving back just a little of its recent gains with the dollar inching up to 154.15 yen from last week’s low of 151.93.The euro was flat at $1.0855, having found support around $1.0825 last week.In commodity markets, gold firmed 0.5% to $2,398 an ounce, supported by the prospect of a dovish Fed. [GOL/]Oil prices inched up, having fallen 1% last week amid concerns about Chinese demand. [O/R]Brent gained 20 cents to $81.33 a barrel, while U.S. crude rose 6 cents to $77.22 per barrel. More

“The government will utilise all available resources to minimise damage,” vice finance minister Kim Beok-seok said.Last week, South Korean authorities launched an investigation into TMON and WeMakePrice, owned by Singapore-based Qoo10, after the Seoul-based e-commerce firms failed to make payments to vendors.On Saturday, TMON and WeMakePrice said that they were making efforts to minimise damage to customers and actively notifying them of ways to cancel credit card payments. Qoo10 has told financial authorities it would secure $50 million to remedy the situation, but no detailed plan has been submitted, the Financial Services Commission said on Sunday. ($1 = 1,384.2700 won) More

The Australian Prudential Regulation Authority (APRA) said the outlook was clouded by geopolitical instability and household debt and inflation holding above the central bank’s target range.”Given the uncertain economic and interest rate outlook, including the possibility of higher cost-of-living pressures, it is important that prudent buffers are incorporated in serviceability assessments,” APRA Chair John Lonsdale said in a statement.The regulator will retain its guideline requiring the country’s main lenders to assess new borrowers’ capacity to meet loan repayments at an interest rate of at least 3 percentage points above the prevailing home loan rate.The countercyclical capital buffer will remain at 1.0% of risk weighted assets so that banks have an additional capital cushion for stress situations. More

TOKYO (Reuters) -Nissan cut planned production by a third at its top Japanese plant this month, a move that will also see it slash output of a flagship crossover model, two people said, as it struggles with weak U.S. demand for its ageing line-up. The Japanese automaker on Thursday reported an almost complete wipe-out in April to June profit and cut its full-year outlook after it was forced to offer deep discounts in the U.S., highlighting the deepening risk it faces in its largest market. Unlike rivals Toyota (NYSE:TM) and Honda (NYSE:HMC), Nissan (OTC:NSANY) doesn’t offer hybrid models in the U.S. and therefore hasn’t benefitted from recent upswing in demand from U.S. consumers for hybrids as enthusiasm around EVs has cooled.  The car maker now plans to produce just under 25,000 vehicles at its Kyushu plant in southwest Japan this month, according to two people with knowledge of the situation. Both declined to be identified because the information isn’t public.Nissan was not immediately able to comment, a spokesperson said.The company expects to make around 10,000 of the Rogue crossover for export at the plant, half of what it had previously planned to make this month of the popular car, the sources said.In addition to Kyushu, Nissan also makes Rogue models in Smyrna, Tennessee.Line workers in Kyushu were now working fewer than the usual eight hours a day due to the scaled-back production, and were clocking a little more than seven hours a day, one of the people said.Nissan had been left with a build-up of 2023 models of the Rogue in the U.S., and those were getting harder to sell with the roll-out of the 2024 model, a second person said. It had to offer aggressive incentives to clear out the 2023 model, while holding back on aggressive promotion of the higher-margin 2024, the person said.HYBRID WOESNissan said in March it would launch 30 new models over the next three years and aimed to raise its global sales by 1 million vehicles while cutting costs to improve profitability. In 2023 it sold around 3.4 million vehicles globally, up 5% from a year earlier.The target may now be a stretch, said Seiji Sugiura, an analyst at Tokai Tokyo Intelligence Laboratory.”Even if Nissan tries to sell luxury or expensive cars, it doesn’t have that kind of brand power in the United States. You can see that when you look at the prices of used cars,” he said. “They have to give discounts, they have to sell with incentives.”Although Nissan sells two EVs in the U.S., it has been caught out by not offering hybrids in that market, betting instead that U.S. consumers would be interested in gasoline-powered cars or EVs. That is likely to continue to weigh. “The overall U.S. market is seeing a shift in demand toward hybrids,” analysts at Goldman Sachs wrote in a note to clients, adding Nissan’s hybrid launch wasn’t expected in the U.S. until 2026.Nissan has said that of its 30 planned new models, 16 would be electrified, including eight EVs and four plug-in hybrids.  CEO Makoto Uchida told a briefing on Thursday the company would look to strengthen its line-up in North America, including with plug-in hybrids, but declined to give specific timing.It will be “some time” before the stock market factors in the company’s envisioned margin expansion based on new models, Goldman Sachs said.Globally, Nissan’s inventory now stands at 640,000 vehicles, the highest level in more than four years. The state of its U.S. business marks another complication for an automaker that is already dealing with years of shrinking market share in China.The U.S. and China are Nissan’s two biggest markets, and the rise of powerful new players in China like BYD (SZ:002594) could mean the Japanese automaker ends up being even more dependent on the U.S. as prospects in China shrink. More

TOKYO (Reuters) – The Bank of Japan is setting the stage for an era of steady interest rate hikes by claiming victory in its long battle with deflation, sources and analysts say, in a major review of past policy that nods to significant consumer behaviour shifts.The findings would highlight how the central bank is drawing a line under former governor Haruhiko Kuroda’s radical monetary stimulus, and creating a new narrative to herald a return to more conventional policy that targets short-term interest rates.The BOJ has said the review, which is governor Kazuo Ueda’s flagship project that looks at the pros and cons of monetary easing steps taken in the past 25 years, won’t have any implication for future monetary policy.But the outcome, yet to be published in full, will present a paradigm shift for the central bank’s ideas around inflation.”The BOJ is using the idea of Japan’s changing social norm to back up its projection that inflation will durably hit 2% in coming years – a prerequisite for rate hikes,” said former BOJ official Nobuyasu Atago, who is currently chief economist at Rakuten Securities Economic Research Institute.Two sources familiar with BOJ’s thinking said the review will help the central bank make the case that Japan’s economy can swallow the impact of a steady increase in current near-zero interest rates.”The key message is that Japan’s deflationary norm has changed,” one of the sources said. “It’s essentially saying that Japan is ready for higher rates.”Under Kuroda’s “bazooka” stimulus deployed in 2013, the BOJ sought to shock the public out of a deflationary mindset with huge money printing and achieve its 2% inflation target in roughly two years.What the experiment failed to achieve was ultimately accomplished by external factors like supply constraints caused by the pandemic and the war in Ukraine, which pushed up import costs and kept inflation above 2% for well over two years.Now, the central bank is pointing to changes in the way households and companies behave to explain how, by the words of deputy governor Shinichi Uchida, “this time is different” in Japan’s prolonged battle with deflation.Japan is on the cusp of eradicating a “deflationary norm,” or the perception held by households and firms that prices and wages won’t rise much, Uchida said in a speech on May 27, describing labour market changes as structural and irreversible.Indeed, while public perceptions are mixed, Japanese consumers appear to be shaking off a long-entrenched view established after the 1990s recession that prices would never rise again.Aki Kuramoto, a 55-year-old office worker with two children, is bracing for an era where prices will keep going up.”I think inflation would last for a while and product prices would rise further,” she said while shopping at a supermarket in Tokyo. “We need to be prepared for that.”GEARING UP FOR CHANGEThe view on inflationary perceptions by Uchida, who spent most of his central banking career battling prolonged economic stagnation, reflects the review’s broad thrust about structural changes in the economy, the sources said.After experiencing decades of mostly flat or negative growth, core inflation has now stayed above the BOJ’s 2% target for well over two years to hit 2.6% in June.Gone are the days when companies were able to hire workers at near-zero wage growth. Faced with an intensifying labour shortage caused by a rapidly ageing population, Japanese firms delivered the biggest wage hikes in three decades this year.”It’s become much easier for companies to raise prices,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute. “Whether this trend continues would depend on the strength of consumption.”The review also sheds light on the side-effects of past stimulus. In several studies conducted as part of the review, the BOJ said financial institutions’ profitability fell sharply in the past 25 years as prolonged low rates hit margins.The BOJ’s review won’t lead to a change in its 2% inflation target, or its policy framework that combines an assessment of its baseline economic scenario with that of financial risks.But it does reflect the bank’s resolve to take short-term rates to levels that neither cool nor stimulate growth – seen by analysts as somewhere between 0.5% to 1.5%.While the full outcome of the review won’t be released until later this year, some of the findings already released highlight progress Japan is making in achieving a cycle in which higher prices push up wages – a prerequisite for rate hikes.A survey conducted on 2,509 companies released in May showed many of them see an economy where prices and wages both rise as being more favourable than one where both are stagnant.Junya Oyama, a 56-year-old employee at an electronics manufacturer, said while his wage hikes have not matched general price increases, inflation for him is still tolerable.”Young people might find it difficult to cope with rising prices, but higher prices are not giving me much trouble and are within the acceptable range.” More

(Reuters) – A look at the day ahead in Asian markets. Asia on Monday kicks off a pivotal week for world markets which includes policy decisions from the Bank of Japan and Federal Reserve, U.S. employment data, inflation numbers from Australia and South Korea, and purchasing managers index reports from around the world.Coming on the heels of the previous week’s volatility, investors’ nerves will be taut. Will the scramble to reduce risk continue, or has last week’s selling opened a window of opportunity to rebuild risk exposure and carry trades? Financial conditions have tightened thanks in large part to the widespread equity selloff, but they are coming from a low base – according to Goldman Sachs. U.S. financial conditions earlier this month were the loosest in two years.Emerging market financial conditions are also tightening, even though U.S. yields and the dollar have slipped, and implied volatility in stocks, bonds and currencies are higher too. Monday may be too soon for animal spirits to fully return, with the BOJ and Fed decisions looming on Wednesday. On the other hand, Friday’s relief rally soothed some of the pain from what was a grueling week as Big Tech dragged stocks lower. Asian stocks, however, didn’t see any rebound on Friday as the MSCI Asia & Pacific ex-Japan index fell to a near-two month low. The index has lost 5% in the last two weeks and has risen only once in the last 10 trading sessions.Chinese equities rebounded on Friday but not enough to prevent the eighth weekly decline in 10 weeks. The 3.7% fall was the biggest weekly loss since January. But China bulls do have a rare bit of good news to enjoy as official data on Saturday showed that industrial profits grew at a faster clip in June. A 3.6% year-on-year rise in profits last month followed a 0.7% gain in May, accelerating first-half gains to 3.5%. This should lift China’s economic surprises index, which is languishing around its lowest level in 10 months.Japanese stocks, meanwhile, will again be at the mercy of the exchange rate, which could be in for another rocky ride. The Nikkei has lost 10% in the last two weeks as the yen has rallied some 10 ‘big figures’ to a four-month high of 152 per dollar.Japanese money markets are attaching a 70% probability on a 10 basis point rate hike from the BOJ on Wednesday, and U.S. rate futures suggest it’s a near certainty that the Fed stays on hold.Can the yen break through 150 per dollar?Asia’s economic calendar is light on Monday but brimming with top-tier events and releases later in the week. The same goes for the corporate calendar, with major earnings releases from Japan rolling out as the week progresses. Here are key developments that could provide more direction to markets on Monday:- Indonesia FDI growth (Q2)- U.S. earnings- U.S. secretaries of State, defense meet Japanese counterparts More

Standard DigitalWeekend Print + Standard Digitalwasnow $85 per monthBilled Quarterly at $199. Complete digital access plus the FT newspaper delivered Monday-Saturday.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts10 monthly gift articles to shareGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionEverything in PrintWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisPlusEverything in Premium DigitalEverything in Standard DigitalGlobal news & analysisExpert opinionSpecial featuresFirstFT newsletterVideos & PodcastsFT App on Android & iOSFT Edit app10 gift articles per monthExclusive FT analysisPremium newslettersFT Digital Edition10 additional gift articles per monthMake and share highlightsFT WorkspaceMarkets data widgetSubscription ManagerWorkflow integrationsOccasional readers go freeVolume discountFT Weekend Print deliveryPlusEverything in Standard DigitalFT Weekend Print deliveryPlusEverything in Premium Digital More

TORONTO (Reuters) – Progress has been made suppressing fires in the Canadian tourist town of Jasper, with the remaining ones expected to be put out by the end of the day, authorities said on Saturday.The fires – caused by a massive wildfire that is sweeping through Alberta’s mountainous Jasper National Park – are said to have destroyed about a third of the town.”Jasper townsite fire suppression has been progressing well, and we are anticipating that all remaining fires within the townsite will be extinguished today,” Parks Canada, the government agency that manages the country’s national parks, said on X.”Power is being restored to parts of the downtown core and critical infrastructure today. This will speed up further damage assessment and recovery.”Still, the status of the wildfire in Jasper National Park remains classified as “out of control,” the government agency said, adding that it is the largest wildfire in more than 100 years in the park.The town and park, which draw more than 2 million tourists a year to this area of the Rocky Mountains, were evacuated on Monday.There are 157 wildfires currently burning across Alberta, according to the latest update from the province. Still, that is six fewer than reported on Friday.”Cooler, rainy weather is helping the firefighters in their efforts of trying to put out some of these wildfires,” said Melissa Story, provincial wildfire information officer, Alberta Wildfire.”We all must be patient. We know this will take some time but rest assured good progress is being made.” More