Economy

Investing.com — China kept its key loan prime rate unchanged at historical lows on Monday, as the country struggles to maintain a balance between supporting a fledgling economic recovery and keeping its yuan currency robust.The People’s Bank of China (PBOC) held its one-year loan prime rate (LPR) at 3.65%, while the five-year LPR, which is used to determine mortgage rates, was maintained at 4.30%. Both lending rates were at their lowest in the past two decades.February now marks the sixth straight month that China has maintained its key lending rates at historically low levels, after an unexpected cut in August 2022.The LPR is decided by the PBOC based on considerations taken from 18 designated commercial banks, and is in turn used as a benchmark by private banks in offering loans.Monday’s move was largely in line with a Reuters poll. But it did disappoint a minority of analysts that forecast more interest rate cuts, given that Chinese economic growth slowed drastically in 2022, and has so far shown little improvement despite the lifting of anti-COVID measures earlier this year.The lifting of anti-COVID measures triggered an immense spike in infections, which disrupted local business activity. Still, Chinese government officials recently declared a “decisive victory” over COVID, citing a relatively small fatality rate in the latest outbreak.China’s move to hold interest rates was also driven by concerns over the yuan, which was dangerously close to moving past the key 7 to the dollar level. The currency had tumbled to its lowest level since the 2008 financial crisis after the People’s Bank unexpectedly cut the LPR in August.But the currency is now under renewed pressure from growing fears of a consistently hawkish Federal Reserve. Strong inflation and job market readings are expected to see the Fed keep raising rates in the near-term, widening the gulf between Chinese and U.S. interest rates. More

BEIJING (Reuters) – China’s job fairs are making a comeback after being forced online by COVID-19 for three years, but subdued wages and less abundant offerings in sectors exposed to weakening external demand point to an uneven and guarded economic recovery.Authorities announced hundreds of such events across the country this month, the latest sign that China is returning to its pre-COVID way of life and that youth unemployment, a major headache for Beijing, may ease from its near 20% peak.In a country of 1.4 billion people, job fairs are one of the most efficient ways for employers and workers to connect. Although attendees said their long-awaited return is encouraging, some were not brimming with confidence.”I only pray for a stable job, and do not have high salary expectations,” said Liu Liangliang, 24, who was looking for a job in a hotel or property management company at a fair in Beijing on Thursday, one of more than 40 held in the capital in February. “The COVID outbreak has hurt many people. There will be more job seekers battling for offers this year.”Employment anxiety is widespread.A survey of about 50,000 white-collar workers published on Thursday by Zhaopin, one of China’s biggest recruiting firms, showed 47.3% of respondents were worried they may lose their jobs this year, up from 39.8% a year ago.About 60% cited the “uncertain economic environment” as the main factor affecting their confidence, up from 48.4% in 2022.Job confidence of those working in consumer-facing sectors, which are recovering faster from a low base, was higher than in sectors such as manufacturing, affected by weakening external demand, or property, which has only just started to show tentative signs of stabilising, the survey showed.A human resources manager at Beijing Xiahang Jianianhua Hotel, who only gave his surname Zhang, said his company had three times more job openings compared with last year, as Chinese resumed travelling.By contrast, Jin Chaofeng, whose company exports outdoor rattan furniture, said he has no plans to add to his payroll as orders from abroad are slowing.”People in my industry are waiting and seeing, prudently,” he said, adding that he plans to cut production by 20%-30% in March from a year earlier. Frederic Neumann, chief Asia economist at HSBC, expects the service and manufacturing sectors to run at vastly different speeds this year, but said overall employment in China should grow.”Restaurants, hotels, and entertainment venues are now scrambling to hire staff. This is especially helpful for younger workers,” Neumann said. “The youth unemployment rate should start to fall in the coming months.”China’s economy grew 3% last year, in one of its weakest performances in nearly half a century. Policymakers are expected to aim for growth of about 5%, which would still be below the blistering pre-pandemic pace.That’s partly because the pain caused by stringent COVID rules persists.At another job fair in the capital, Wei, a former cleaner looking for similar work, said she and her unemployed husband are struggling with credit card debt.Wei, who has a child in primary school and did not want to give her full name, citing personal privacy, quit her previous job last year after her employer wanted to cut her wages to 3,200 yuan ($465.34) per month from 3,500 yuan despite demanding she work late hours to conduct COVID-related disinfection.”We owe the banks hundreds of thousands yuan,” she said. “We are overwhelmingly anxious.”($1 = 6.8767 Chinese yuan renminbi) More

SINGAPORE (Reuters) – The dollar was on the front foot on Monday, supported by a strong run of economic data out of the United States that traders bet will keep the Federal Reserve on its monetary policy tightening path for longer than initially expected.The greenback advanced broadly in early Asia trade, sending sterling 0.12% lower to $1.2028 and the Aussie falling 0.18% to $0.6866.Against the Japanese yen, the dollar rose 0.14% to 134.32.Trading is likely to be thin on Monday, with U.S. markets closed for Presidents’ Day.A slew of data out of the world’s largest economy in recent weeks pointing to a still-tight labour market, sticky inflation, robust retail sales growth and higher monthly producer prices, have raised market expectations that the U.S. central bank has more to do in taming inflation, and that interest rates would have to go higher.”For the week ahead, the dollar can track higher given the recent run of economic data which supports the narrative of higher-for-longer interest rates,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia (OTC:CMWAY) (CBA).Markets are now expecting the Fed funds rate to peak just under 5.3% by July.Hawkish comments from Fed officials have also underpinned the U.S. dollar, as they signalled that interest rates will need to go higher in order to successfully quash inflation.Similarly, two European Central Bank (ECB) policymakers said on Friday that interest rates in the euro zone still have some way to rise, pushing up market pricing for the peak ECB rate.That, however, did little to lift the euro, which was last 0.16% lower at $1.0677.”The hawkish ECB comments aren’t likely to support euro, given the dollar strength,” said Kong.Elsewhere, the U.S. dollar index rose 0.05% to 104.03, and is up nearly 2% for the month so far, keeping it on track for its first monthly gain since last September.The kiwi slipped 0.17% to $0.6232, with eyes on the Reserve Bank of New Zealand’s (RBNZ) interest rate decision on Wednesday.The RBNZ is expected to scale down its tightening campaign only slightly, with a half-point interest rate hike to 4.75%.”With inflation so high … not staying the course could mean even higher interest rates are required down the track,” said analysts at ANZ.In Asia, focus is on China’s loan prime rate decision on Monday, with markets widely expecting its benchmark lending rates to be kept unchanged at the monthly fixing.”We don’t think there will be any changes made,” said CBA’s Kong. “Our view has been that the (Chinese) government should announce more easing measures to aid the Chinese recovery.”The offshore yuan was last marginally lower at 6.8783 per dollar. More

SYDNEY (Reuters) – Asian shares got off to a subdued start on Monday as a U.S. holiday made for slow trading ahead of minutes of the last Federal Reserve meeting and a reading on core inflation that could add to the risk of interest rates heading higher for longer.Geopolitical tensions were ever present with North Korea firing more missiles and talk of Russia ramping up attacks in Ukraine before Friday’s one- year anniversary of the invasion.There were reports the White House planned new sanctions on Russia, while Secretary of State Antony Blinken on Saturday warned Beijing of consequences should it provide material support, including weapons, to Moscow.All of which made for a cautious start and MSCI’s broadest index of Asia-Pacific shares outside Japan was largely flat, after sliding 2.2% last week. Japan’s Nikkei dipped 0.2% and South Korea 0.4%.S&P 500 futures eased 0.2%, while Nasdaq futures lost 0.3%. The S&P touched a two-week low on Friday as a run of strong U.S. economic news suggested the Fed might have more to do on interest rates even after hiking a huge 450 basis points in 11 months.”It’s the most aggressive Fed tightening in decades and U.S. retail sales are at all-time highs; unemployment at 43-year lows; payrolls up over 500k in January and CPI/PPI inflation reaccelerating,” noted analysts at BofA. “That’s a Fed mission very much unaccomplished.”They warned the repeated failure of the S&P 500 to break resistance at 4,200, could unleash a retreat to 3,800 by March 8.Markets have steadily lifted the expected peak for Fed funds to 5.28%, while sharply scaling back rate cuts for later this year and next.Minutes of the Fed’s last meeting due on Wednesday should add colour on the deliberations, though they have been superseded somewhat by barnstorming numbers on January payrolls and retail sales.The latter means figures on U.S. personal consumption expenditures (PCE) due this Friday are expected to show a 1.3% jump in January, more than recovering from weakness in the prior two months.The Fed’s favoured inflation indicators, the core PCE index, is seen rising 0.4%, the biggest gain in five months, while the annual pace may have slowed just a fraction to 4.3%.There are also at least five Fed presidents speaking this week, to provide running commentary.Earnings season continues this week with major retailers Walmart (NYSE:WMT) and Home Depot (NYSE:HD) set to offer updates on the health of the consumer.Other companies reporting include chip company Nvidia (NASDAQ:NVDA), COVID-19 vaccine maker Moderna (NASDAQ:MRNA) and e-commerce store front eBay (NASDAQ:EBAY).The prospect of more Fed hikes has lifted Treasury yields and generally supported the dollar, which hit a six-week top on a basket of currencies last week.The euro was stuck at $1.0676, having touched a six-week low of $1.0613 on Friday, while the dollar was just off a two-month top on the yen at 134.34.Investors are anxiously awaiting Friday’s testimony from the newly nominated head of the Bank of Japan, and his thinking on the future of yield curve control (YCC) and super-easy policy.Any hint of an early end to YCC could see yields spike globally and send the yen surging, so analysts assume Kazuo Ueda will be careful not to spook markets.Higher yields and a firmer dollar have not been good for gold, which was struggling at $1,837 an ounce and not far from a five-week low of $1,807. [GOL/]Oil prices were trying to steady after shedding around 4% last week amid signs of ample supply and concerns over future demand. [O/R]Brent edged up 14 cents to $83.14 a barrel, while U.S. crude rose 15 cents to $76.49. More

Australia’s energy price caps and planned export controls threaten to stifle investment and upset relationships with key trading partners, as one of the world’s biggest gas exporters acts to cushion consumers from rising prices. Prime Minister Anthony Albanese’s government this month proposed introducing laws giving it the right to limit exports in response to rising concerns about domestic supply. It introduced in December temporary price caps on uncontracted gas and a mandatory code of conduct that would enforce the sale of gas at a “reasonable price”.Analysts and businesses warn that these interventions could have serious consequences for liquefied natural gas investment as well as trading relationships with countries including Japan and South Korea. Australian gas last year accounted for more than 42 per cent of Japan’s LNG imports, 34.5 per cent of China’s and 22 per cent of South Korea’s, according to consultancy EnergyQuest and official trade statistics. “There is growing concern that Labor is undermining commitments to trade partners about gas exports. That should be a red flag for the government,” said Saul Kavonic, an energy analyst with Credit Suisse. “International companies will now see Australia as a country of increased sovereign risk,” Kavonic added. Since the Albanese government was elected last May, it has won praise from the business community over its diplomatic efforts to end trade tension with China, the country’s biggest trading partner. But the energy initiatives have raised questions over how the government intends to balance public concern over costs and supplies with the commitment to invest in Australia’s vast energy and mineral riches, the most important pillar of the country’s export economy. It also marks a shift away from the previous rightwing government’s policies which were broadly supportive of the fossil fuel and mining industries. “This is the most anti-business, anti-market policy Australia has had for some time,” said Kavonic.

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The Japanese embassy in Canberra has said it is closely monitoring the situation and Japanese company Mitsui, in an interview with Australian media, warned of the “unintended consequences” of short-term interventions.Despite reassurance from Canberra, Japanese trading houses with energy interests in Australia have expressed concerns about the impact of the export controls. “It is true that we are not currently facing any shortage of Australian LNG but we have expressed our concerns at every opportunity,” said a Japanese trade ministry official.An official at South Korea’s Ministry of Trade, Industry and Energy said its concern was limited because South Korea received LNG from Australia mostly on long-term contracts.Graeme Bethune, chief executive of EnergyQuest, said Japanese and Korean angst about the limits on LNG exports could have repercussions on the switch to green energy. “Australia is also counting on both countries to invest in Australian hydrogen export projects,” he pointed out. Following a surge in the price of gas following Russia’s full-scale invasion of Ukraine, the value of Australia’s LNG exports hit A$90.8bn (US$61.9bn) in 2022, up 83 per cent from 2021, according to the Australian Bureau of Statistics.The government brushed off the industry’s outrage in December. “I see no reason to jump at shadows,” said Albanese when asked about warnings by the sector that the policy would stifle investment. He similarly dismissed concerns about the impact on trade relationships. Still, the impact on industry is tangible. Ian Davies, chief executive of Senex Energy, said this week that the “reckless intervention” by the government threatened to “suffocate industry investment confidence” and could lead to companies having to break export contracts to divert supply to the domestic market. The company suspended a proposed A$1bn investment following the intervention. Senex, which produces oil and gas in Queensland and South Australia, is majority-owned by South Korean steelmaker Posco Group. Davies said the intervention would mean Posco would view the country as a “much riskier proposition”.David Maxwell, head of Cooper Energy which last month suspended an expansion of its gas operations in Gippsland, Victoria, argued that the price caps and export controls would ultimately increase pressure on the domestic market because it would stop new supply coming into the market. “Longer-term cost pressures and energy security concerns will very likely be much more severe if policy settings and regulations do not support needed investment in new competitive supply,” he said. Analysts and bankers also cite government policy as a threat to the $12bn takeover bid of energy company Origin by Canada’s Brookfield Asset Management and US private equity group EIG Global Energy Partners. While talks continue, Origin has said the political climate makes it difficult to sign long-term contracts for gas supply. The government’s energy policy has also sounded alarm bells in the wider resources sector. Geraldine Slattery, BHP’s Australia president, said: “Recent proposed changes to legislative and fiscal settings have created an element of uncertainty that could see Australia yield some of its competitive advantage.”Additional reporting by Kana Inagaki in Tokyo and Song Jung-a in Seoul More

LONDON (Reuters) – Average asking prices for British residential property rose by just 14 pounds ($17) in February from January, the smallest rise on record for a month which normally sees a big seasonal increase, data from property website Rightmove (OTC:RTMVY) showed on Monday.Rightmove said the minimal increase – effectively zero in percentage terms – suggested that property sellers were heeding advice to price their homes realistically in order to sell them into a market which has slowed sharply in recent months.Tim Bannister, Rightmove’s director of property science, said asking prices usually rose at this time of the year, which marks the start of the spring selling season.”This month’s flat average asking price indicates that many sellers are breaking with tradition and showing unseasonal initial pricing restraint,” he said.The monthly change – which is not seasonally adjusted – was the smallest January to February move since Rightmove’s records started in 2001. Compared with a year earlier, asking prices were still 3.9% higher.At the start of February, mortgage lender Nationwide Building Society reported the longest run of monthly falls in selling prices since the global financial crisis.Asking prices remaining flat on the month, rather than falling, could be a positive sign for the housing market, suggesting a softer landing than many analysts have forecast, Rightmove said. Economists polled by Reuters in November forecast prices would fall by 5% this year, while analysts at Japanese bank Nomura predicted last month that there would be a 15% decline by mid-2024.Rightmove said there had been some recovery in demand since late 2022, when mortgage rates soared following former prime minister Liz Truss’s “mini-budget”. Buyer demand was up by 11% in the first two weeks of February compared with the same period in 2019. The number of sales agreed was down 11% on pre-pandemic levels, compared with a 30% crash just after the mini-budget. British house prices had risen by more than a quarter since the start of the COVID-19 pandemic, mirroring a trend in other rich economies which reflected ultra-low interest rates and a greater desire for living space during lockdowns.Since December 2021, British interest rates have risen steeply. The Bank of England raised interest rates from 3.5% to 4% this month to tame double-digit inflation, and markets expect the main rate to peak at 4.5% in June. “The frantic market of recent years was unsustainable in the long term, and our key indicators now point to a market which is transitioning towards a more normal level of activity after the market turbulence at the end of last year,” Bannister said.($1 = 0.8363 pounds) More

(Reuters) – Australian supermarkets will reap bigger profits in fiscal 2023 half-year due to decades-high inflation and increased savings, but analysts warned of a rough second-half as households reel from mounting expenses due to higher cost of living.Top supermarket chains Woolworths Group and Coles Group (OTC:CLEGF) will likely see growth in their half-year profit, according to analyst estimates, helped by higher shelf prices and lower COVID-19 related costs.Australian households face higher grocery and energy bills due to global inflationary pressures, while budgets are further squeezed by higher mortgage payments because of the central bank’s rate hikes aiming to quell inflation. The hikes have added A$900 a month in repayments to the average A$500,000 mortgage, according to an estimate. “There’s a bit of a disconnect between confidence and reality at the moment – the confidence levels are low, but people are still spending. So I think outlook statements will be cautious” said Matthew Haupt, a lead portfolio manager whose WAM Leaders fund has holdings in Woolworths and Coles. Haupt said high household savings after the government handed out stimulus checks during the pandemic has kept Australians spending despite higher prices, but once rates peak and mortgage payments top out, retailer top-lines may shrink. Woolworths said food prices over the September quarter rose 7.3%, while Coles reported a 7.1% rise. Australia reported headline inflation of 7.8% in the December quarter, a 33-year high.A return to in-store shopping is also expected to improve margins, according to analysts at Macquarie, as in-store margins are usually better than online. Analysts at Citi also expect benefits from selling prices rising faster than cost bases.As spending power reduces over the second-half, electronics retailers were seen feeling the pinch disproportionately, as later confirmed by JB Hi-Fi reporting slower sales growth and flagging an “uncertain period” ahead.”We are concerned that the rising cost of living, fixed rate mortgage roll-offs and normalising service consumption erode consumer discretionary spending in the second half of calendar 2023,” analysts at Macquarie said. Retail conglomerate Wesfarmers’ main earner, Bunnings, reported only a slight pickup in profit and Wesfarmers relied on a recovery in Kmart, which was under lockdown in the previous period, for profit growth.Coles and Woolworths are expected to report half-yearly earnings on February 21 and 22, respectively.Brokerage estimates:1H23 estimates Woolworths Coles Macquarie A$842 million A$568 million Goldman Sachs (NYSE:GS) A$893 million A$542 million UBS A$871 million A$555.2 million Jefferies A$881 million A$584 million Average A$871.75 million A$562.3 million 1H22 reported A$676 million A$549 million More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.Three central bank policy decisions dominate the economic calendar in Asia this week, as investors continue to grapple with the profound market implications of the most dramatic repricing of U.S. interest rate expectations in decades. This comes against an increasingly nervy geopolitical backdrop – Sino-U.S. relations are deteriorating over the spy balloon crisis, and the one-year anniversary of Russia’s invasion of Ukraine falls on Friday.U.S. markets are closed on Monday for Presidents Day so Asian activity and volumes will be lighter than usual. This could give traders some rare breathing space to reflect on the scorching rise in U.S. market-based rates and yields.Wall Street and global markets more broadly have held up remarkably well – the S&P 500 and MSCI World index ended the week down just 0.3%, and the Nasdaq rose 0.6%.Asia has felt the heat more. The MSCI Asia ex-Japan index is down three weeks in a row, its worst run since October. Chinese stocks are down three weeks too, with last week’s fall accelerated by Friday’s 1.5% slump – the steepest this year – after Lenovo reported its largest revenue fall in 14 years.The People’s Bank of China is scheduled to set its lending benchmark interest rates on Monday morning. Many analysts expect it to keep benchmark lending rates unchanged for a sixth month, leaving the one-year loan prime rate at 3.65% and the five-year rate at 4.30%. GRAPHIC – Chinese interest rates The Reserve Bank of New Zealand is expected to scale back its tightening on Wednesday, and raise rates by half a percentage point to 4.75%. It will then repeat the dosage by mid-year for a peak rate of 5.25%, according to a Reuters poll. The Bank of Korea on Thursday, meanwhile, is expected to keep its policy rate on hold at 3.5%, which would mark its first on-hold decision after back-to-back hikes since April. But don’t be surprised if guidance is more hawkish than last month – inflation is sticky, the U.S. policy outlook has shifted dramatically, and the won has slumped 7% in the last two weeks. GRAPHIC – New Zealand and South Korea interest rateshttps://fingfx.thomsonreuters.com/gfx/mkt/movaklxyeva/RBNZBOK.jpg Other market-moving Asian economic data this week include Japanese consumer price inflation for January on Friday – expect a rise in the annual rate to a 41-year high above 4% – and final readings of Q4 Hong Kong and Taiwan GDP on Wednesday. On the corporate front, the controversy surrounding India’s Adani Group is becoming increasingly political. Reuters reported on Friday that the Indian government has told the country’s top court to examine the “truthfulness” of the allegations made against the group by U.S. short seller Hindenburg Research. Here are three key developments that could provide more direction to markets on Monday:- China interest rate decision- Indonesia current account (Q4)- Euro zone consumer confidence (February) (By Jamie McGeever; Editing by Deepa Babington) More