Economy

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$75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.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 edition More

TOKYO (Reuters) – The yen rose to a three-week high against the dollar on Monday as Federal Reserve Chair Jerome Powell’s emphatic dovish shift contrasted sharply with Bank of Japan chief Kazuo Ueda’s steadfastly hawkish tone. The U.S. currency hovered near its lowest in 13 months against the euro. It also sagged closer to levels last seen in March 2022 versus sterling, with Bank of England head Andrew Bailey’s comments that it was “too early to declare victory” over inflation signaling a less aggressive stance on interest rate cuts than the Fed. The dollar sank as much 0.59% to 143.56 yen for the first time since Aug. 5 in the early hours of Monday before last trading down 0.25%.Sterling was steady at $1.3215 after jumping as high as $1.32295 on Friday for the first time in 17 months.Although Fed officials had sounded increasingly dovish in the lead up to the Fed’s annual Jackson Hole symposium, Powell on Friday “used stronger language” than his peers when delivering his keynote speech, said Tapas Strickland, head of market economics at National Australia Bank (OTC:NABZY).”Importantly, there was a notable absence of caveats such as ‘gradual/gradualism’,” which “is likely what excited markets,” Strickland said.Over in Asia, BOJ’s Ueda, who spoke in parliamentary testimony earlier on Friday, “stuck to the script of the BOJ needing to adjust the degree of easing – central bank-speak for a further increase in the policy rate from a low level – and he played down the significance of the July rate hike on market turmoil,” Strickland said.Many market participants anticipated Ueda might strike a less hawkish note in the special session of parliament, which was called amid criticism the surprise hike last month helped spark a rapid unwind of bearish yen bets and aggressive sell-off of Japanese stocks. The dollar index – which measures the currency against a basket of six major peers, including the euro, sterling and yen – languished at 100.64, just off the 13-month low of 100.60 reached at the end of last week.The euro was little changed at $1.1190, not far from its Friday high of $1.1201, a level last seen in July of last year. That’s despite sources telling Reuters that European Central Bank policy makers are lining up behind another rate cut on Sept. 12.Traders unanimously expect the Fed to kick off its loosening campaign on Sept. 18, but see 36.5% odds of a super-sized 50-basis point reduction, according to the CME Group’s (NASDAQ:CME) FedWatch Tool. That’s up from 25% odds a week earlier.Elsewhere, the Australian dollar eased 0.1% to $0.6790, but still remained close to Friday’s peak of $0.67985, the highest level since July 11.The Chinese yuan ticked up slightly to 7.1130 per dollar in offshore trading, the strongest level since Aug. 5.Leading cryptocurrency bitcoin added 0.9% to $64,271.60. More

SYDNEY (Reuters) – Asian shares crept cautiously higher on Monday, while the dollar and bond yields were on the wane ahead of inflation data that investors hope will pave the way for rate cuts in the United States and Europe.Oil prices climbed 0.7% after Israel and Hezabollah traded rocket salvos and air strikes on Sunday, stirring worries about possible supply disruptions if the conflict escalated. Brent rose 51 cents to $79.53 a barrel, while U.S. crude added 50 cents to $75.33 per barrel. [O/R]Investors are also anxiously awaiting earnings from AI darling Nvidia (NASDAQ:NVDA) on Wednesday to see if it can match the market’s uber-high expectations.The stock is up some 150% year-to-date, accounting for around a quarter of the S&P 500’s 17% year-to-date gain.”Nvidia will beat consensus expectations, they always do, but investors are so ingrained in seeing revenue come in $2 billion plus above the analysts’ consensus or we could easily see a sell the news event,” said Chris Weston, head of research at broker Pepperstone.That means Nvidia would have to report sales of $30 billion or more and guidance for Q3 of $33 billion or above, he added.Early Monday, S&P 500 futures and Nasdaq futures were down 0.1%. [.N]MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.4%, after rising 1.1% last week, while South Korea rose 0.3%.Japan’s Nikkei eased 0.7% as a stronger yen pressured exporter stocks.The yen had jumped on a broadly weaker dollar on Friday after Federal Reserve Chair Jerome Powell said the time had come to start easing policy and emphasised that the central bank did not want to see further weakening in the labour market.”Importantly there was a notable absence of caveats such as ‘gradual/gradualism’ as used by other Fed officials,” noted Tapas Strickland, head of market economics at NAB.”The jobs report on September 6 is clearly important as Powell is willing to cut rates to ward off downside risks to employment and to maintain a strong labour market,” he added. “In summary, Powell has increased the chances of a soft landing.”LOTS OF CUTS COMINGFigures on U.S personal consumption and core inflation are due on Friday, along with a flash reading on European Union inflation. Analysts generally assume the data will be benign enough to allow for rate cuts in September.Fed fund futures are fully priced for a quarter-point cut at the Sept. 18 meeting, and imply a 36% chance of an outsized move of 50 basis points. The market also has 103 basis points of easing priced in for this year and another 122 basis points in 2025.”We continue to expect the FOMC to deliver an initial string of three consecutive 25bp cuts at the September, November, and December meetings,” said analysts at Goldman Sachs.”Our forecast rests on our assumption that the August employment report will be stronger than the July report, but we continue to think that if instead the August report is weaker than we expect, then a 50bp cut would be likely.”Markets are also fully priced for a quarter-point cut from the European Central Bank next month, and a total 163 basis points of easing by the end of 2025.Yields on two-year Treasuries stood at 3.91%, having fallen almost 10 basis points on Friday, while 10-year yields held at 3.79%. [US/]The dollar slipped a further 0.3% to 143.97 yen, having fallen 1.3% on Friday. The euro was up at $1.1190 and just off a 13-month top, while the Swiss franc held firm at 0.8472 per dollar. [USD/]A softer dollar combined with lower bond yields to underpin gold at $2,516 an ounce, and near an all-time peak of $2,531.60. [GOL/] More

(Reuters) – Earnings of Australia’s top supermarket chains are likely to show constricted spending presenting a challenging outlook for Woolworths and Coles, as consumers deal with painfully high mortgage rates and sticky inflation.Decade-high interest rates and stubborn inflation still running above the central bank’s target range has prompted consumers to be mindful of their spending, analysts warned.The results will show the impact of a protracted cost of living crisis on the companies, which ring up two-thirds of every Australian dollar spent on groceries and are closely watched as barometers of the wider economy.Consumers are becoming more discerning by trading down in items such as food by choosing lower-priced items and more at-home consumption, UBS analysts wrote in a note.Woolworths and Coles “face headwinds over the next 12 months because it’s unlikely the economic outlook will improve due to the higher rate environment,” said Kyle Rodda, senior financial market analyst at Capital.com.The softening in consumer demand should be reflected in their earnings, he added. Woolworths is set to report annual results on Aug. 28 while smaller rival Coles will report on Aug. 27. Analysts on average expect Coles to fare better.Coles has said it expects more volume growth after a surge in supermarket sales in the third quarter in contrast to Woolworths which posted weak food sales.”With cost-of-living pressures remaining a hot topic, I expect that the profit margins of the big supermarket chains will again be under the microscope,” said Tim Waterer, KCM Trade’s chief market analyst.Jefferies analysts see underlying earnings margin expansion for Coles, rebounding from a period of margin contraction in the prior year and due to benefits from initiatives to connect brands with customers.Meanwhile, Australian food underlying earnings margin for Woolworths is expected to contract due to increased business costs and supply chain investments. Net profit after tax (NPAT) from continuing operations for fiscal 2024 is expected to come in at A$1.10 billion ($737.99 million) for Coles, slightly higher than A$1.04 billion in the prior year, according to Jefferies’ estimates. However, NPAT before significant items for Woolworths is expected to decline to A$1.67 billion, from A$1.72 billion last year.Woolworths could also announce a special dividend along with its annual results, from the proceeds of its stake sale in liquor store and pub operator Endeavour Group, according to analysts.($1 = 1.4905 Australian dollars) More

JACKSON HOLE, Wyoming (Reuters) -The U.S. Federal Reserve’s dovish shift will likely give the Bank of Japan some respite in its battle to tame a weak yen, but could complicate its efforts to raise interest rates if the two central banks’ diverging policy paths keep markets jittery.At an annual symposium in Jackson Hole, Wyoming, Fed Chair Jerome Powell said on Friday “the time has come” to cut rates as rising risks to the job market left no room for further weakness, offering an explicit endorsement of an imminent policy easing.The remarks came hours after BOJ Governor Kazuo Ueda told parliament that while the BOJ will keep an eye out on the fallout from unstable markets, it will continue to hike rates if inflation remains on track to durably hit its 2% target.The yen rose against the dollar after Ueda’s remarks and extended its gains on those from Powell, as markets focused on prospects of a narrowing U.S.-Japan interest rate gap.”The yen buying today is understandable given Governor Ueda showed very little sign of a shift in the views and plans of the BOJ following the financial market turmoil earlier this month,” said Derek Halpenny, head of research global markets EMEA at MUFG, in a note to clients.The Japanese currency’s rebound comes as a relief for the BOJ, which has been under political pressure to stem its falls that hurt consumption by inflating imported food and fuel costs.But the BOJ’s rate hike path is full of uncertainty as Japan swims against the global rate-cut tide, which could leave its currency and stock prices susceptible to wild swings.Having seen market rupture after the BOJ’s July rate hike, the Japanese central bank already feels the need to tread slowly and carefully.”Markets at home and abroad remain unstable, so we will be highly vigilant to market developments for the time being,” Ueda said on Friday, adding that big market swings may affect policy decisions if they alter the board’s inflation projections.Domestic political considerations also complicate the BOJ’s rate hike path as Prime Minister Fumio Kishida, who appointed Ueda to the top BOJ post, is set to step down and pass the baton to the winner of a ruling party leadership race in September.While most leading candidates to succeed Kishida have embraced the BOJ’s plan for moderate rate hikes, it is uncertain whether the new premier will support higher borrowing costs if volatile markets weigh on corporate profits.”With so much uncertainty, the BOJ probably won’t be able to take bold steps,” said former BOJ board member Makoto Sakurai, ruling out the chance of another rate hike this year. “Until the domestic political situation stabilises, the BOJ might find it hard to raise rates,” he said.A latest poll by Reuters showed a majority of economists expect the BOJ to hike rates again this year, but more see the chance of it happening in December rather than October.FRAGILE ECONOMY A RISKThe BOJ’s surprise decision to hike rates in July and Ueda’s signal of further rate hikes jolted financial markets earlier this month, forcing his deputy to offer dovish reassurance that no hikes will be coming until markets stabilise.The key message from Ueda’s remarks in parliament on Friday was that while the BOJ will be in no rush to hike rates, the market rout won’t derail its longer-term plan to keep pushing up borrowing costs, said two sources familiar with its thinking.Big data analysis of recent BOJ commentary underscores the bank’s rate-hike stance with its bias on inflation remaining “very positive,” said Jeffrey Young, chief executive officer of DeepMacro, a U.S. fintech firm that conducts AI-driven analyses of economic indicators and policymakers’ comments.”Could we get another one by the end of the year? Well, probably. I think that’s what the model is saying,” he said on the chance of another rate hike by the BOJ.”If you have inflation and growth on the firm side, and you have BOJ rhetoric still biased to say that inflation and growth are both okay, the only thing that would really stop it from raising rates would be market fallouts.”Some analysts, however, are more cautious about the strength of Japan’s economy. While consumption rebounded in the second quarter, rising living costs have weighed on household sentiment. A U.S. slowdown could also weigh on exports.”Domestic demand is very weak,” said Sayuri Shirai, an academic at Keio University in Tokyo. “From an economic perspective, there’s little reason for the BOJ to raise rates.” More

(Reuters) – A look at the day ahead in Asian markets by Noel Randewich.Asia investors will digest the near certainty of a September loosening of U.S. monetary policy on Monday after a speech by U.S. Federal Reserve Chair Jerome Powell on Friday confirmed that the United States is ready to begin cutting interest rates.At his keynote speech to the Kansas City Fed’s annual economic conference in Jackson Hole, Wyoming, Powell said “the time has come for policy to adjust,” given that upside risks to inflation have diminished and downside risks to employment have increased. Powell’s comments lifted the yen and weakened the dollar index, with lower interest rates relative to Japanese rates making Japan’s currency more attractive.Dollar/yen hit its lowest since August 6 in late Friday trading.Geopolitical risk ratcheted higher over the weekend as Hezbollah launched hundreds of rockets and drones at Israel early on Sunday while Israel’s military said it struck Lebanon with around 100 jets to thwart a larger attack. It was one of the biggest clashes in more than 10 months of border warfare and raised the specter of Israel’s war in Gaza turning into a wider conflict.Investors will also mull the outlook for Japanese interest rates after Bank of Japan Governor Kazuo Ueda on Friday reaffirmed his resolve to raise interest rates if inflation stays on course to sustainably hit the 2% target.Ueda’s comments came as data showed Japan’s core inflation accelerated for a third straight month in July, with a slowdown in demand-driven price growth potentially complicating the central bank’s decision on further rate hikes.The Nikkei share average ended up 0.4% on Friday following Ueda’s parliamentary testimony.Having spent all year trying to put a floor under the tumbling yuan, China’s central bank is suddenly faced with the opposite problem and is turning to subtle ways to stop the currency from appreciating sharply.The usually restrained yuan has strengthened 1.3% against the dollar in August, lifted by expectations of Fed rate cuts strengthening Japan’s yen.On China’s commercial banking front, Bank of China Vice Chairman and President Liu Jin resigned on Sunday. The state-owned lender said its board had approved Chairman Ge Haijiao to serve as acting president.The U.S. political landscape offered few new signs of certainty for global investors after Vice President Kamala Harris sealed the Democratic presidential nomination with a muscular speech on Thursday, laying down broad foreign policy principles and sharp contrasts with Republican rival and former President Donald Trump.With 11 weeks left in the contest for the White House, contracts for a Harris victory are trading at 55 cents, with a potential $1 payout, on the PredictIt politics betting platform. Contracts for a win by Trump, who has suggested he would impose tariffs of 60% or higher on all Chinese goods, are at 49 cents.Tariffs were in the spotlight last week after China’s Commerce Ministry met with automakers and industry associations to discuss raising import tariffs on large-engined gasoline vehicles, sounding a warning as the European Union nears a tariff decision on Chinese electric cars. On Friday, the United States added 105 Russian and Chinese firms to a trade restriction list over their alleged support of the Russian military. Here are key developments that could provide more direction to Asian markets on Monday:- Singapore Manufacturing (July)- Japan Leading Indicator (Revised) (June) More

SYDNEY (Reuters) – Australian employees now have the right to ignore their bosses outside working hours thanks to a new law which enshrines the “right to disconnect.”Here are key facts about the law, which came into force on Monday: WHAT DOES THE LAW SAY?Employers will still be able to contact their workers, however staff will now have the right not to respond outside working hours unless that refusal is unreasonable. This means an employee can refuse to monitor, read or respond to contacts from an employer or a third party such as a client.It will be up to Australia’s industrial umpire, the Fair Work Commission (FWC), to decide whether a refusal is unreasonable or not. In doing so, it must take into account factors like the employee’s role, the reason for the contact and how it is made.WHAT ARE THE PENALTIES?Employers and employees must first try and resolve disputes at work. If that fails, the FWC can intervene.The FWC can order a company to stop contacting an employee or bar it from taking disciplinary action against workers who refuse contact, according to the Australian Industry Group.However, it can also order an employee to respond to an employer in cases where their refusal is not reasonable. Contravening such an order could result in fines of up A$19,000 ($12,764) for an employee or up to A$94,000 for a company.WHAT HAS BEEN THE RESPONSE?The law has been welcomed by unions and rights groups, who say new rights for workers are overdue. But it has drawn criticism from employer associations who say the legislation is flawed and was rushed into law. They say it could harm productivity.DO ANY OTHER COUNTRIES HAVE SIMILAR LAWS? Similar laws giving employees a right to switch off their devices are already in place in France, Germany and other countries in the European Union and Latin America.In 2018, Rentokil Initial was ordered to pay 60,000 euros by a French court for breaching an employee’s ‘right to disconnect’ from work, after requiring him to constantly have his phone turned on in case of emergencies, according to The Telegraph.($1 = 1.4885 Australian dollars) More