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Asia Shares Wary Of Us Inflation Dollar Breaks Down

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SYDNEY – Asian share markets turned mixed on Wednesday as investor nerves were strained ahead of a U.S. inflation report that could soothe, or inflame, fears of faster rate hikes globally.

Japanese demand for yen also saw the dollar break last year’s low and skid to a 15-month trough at 107.01, dragging the U.S. currency down broadly.

That in turn pressured Japan’s Nikkei which slipped 0.6 percent to test four-month lows. Dealers said there was a lot of focus on the 200-day moving average at 21,031 as a break there would ring bearish alarm bells.

Other Asian markets were steadier, as were E-Minis for the S&P 500. MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.4 percent.

Moves were tentative with investors clearly scarred by the return of volatility.

BofA Merrill Lynch’s February Fund Manager Survey found a record one-month jump in the net percentage of investors taking out protection against a sharp fall in equity markets.

Funds were rotating into cash and out of equities, reducing their stock allocation to a net 43 percent overweight, from 55 percent, the largest one-month decline in two years.

Much now rested on what the U.S. consumer price report showed for January, given it was the risk of accelerating inflation that triggered the global rout in the first place.

Headline consumer price inflation is forecast to slow to an annual 1.9 percent and core inflation to 1.7 percent, an outcome that could help calm nerves. The concern is the figures could surprise on the high side as wages did a couple of weeks ago.

“The risk seems asymmetric to me,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.

“Even a slightly higher number could set the cat among the pigeons given the late cycle stimulus the Trump Administration is pumping into the U.S. economy.”

BEWARE THE TWIN DEFICITS

In currency markets, the U.S. dollar was under fire again losing 0.28 percent on a basket of currencies to 89.453.

The euro firmed to $1.2363 and away from last week’s trough at $1.2204. It was aided by expectations German GDP data later on Wednesday would show strong growth.

Analysts said investors were becoming nervous about the prospect of swelling U.S. budget and trade deficits given the passage of huge tax cuts and spending plans.

“The re-emergence of the twin deficit should send shivers down the dollar’s spine,” said Mark McCormick, North American head of FX strategy at TD Securities.

He noted the IMF had estimated that a 1 percent rise in the budget deficit led to a 0.6 percent increase in the U.S. current account deficit. That suggested the twin deficit could exceed 7 percent of GDP by the end of the decade, all of which had to be funded by offshore money.

“Those numbers do not bode well for the greenback in the medium term,” concluded McCormick.

The drop in the dollar gave a fillip to commodities, with copper firm after jumping 2.7 percent overnight.

Spot gold edged up 0.4 percent to $1,335.01 per ounce, leaving behind last week’s one-month low of $1,306.81.

Oil prices steadied for now, though concerns about oversupply were never far away.

U.S. crude futures eased 1 cent to $59.18 a barrel, while Brent futures gained 9 cents to $62.81. [O/R]

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Asia Shares Rebound As Fidgety Us Rate Fears Shift Again

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SYDNEY – Asian shares rebounded on Friday as comments from a Federal Reserve official eased worries about faster rate rises in the United States, while the dollar ticked higher as investors dipped their toes back into riskier assets.

Indications were mixed for other global equity markets, with E-Mini futures for the S&P 500 up 0.3 percent but London’s FTSE futures slipping 0.2 percent.

Financial markets have fluctuated wildly this month as investors fretted about how fast the Fed might raise rates in the wake of data showing a pick up in U.S. inflation.

Even though broader U.S. price pressures still appear modest for now, markets are fully pricing in three rate hikes this year, one more than was seen just a few months ago. Some analysts even expect four.

That in turn has stoked anxiety that many central banks will start to tighten policy and raise borrowing costs, hurting corporate earnings and clouding the outlook for what had been expected to be another solid year of global economic growth.

MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.9 percent on Friday to add on to the previous week’s 3.9 percent gain.

It is still down more than 4 percent in February so far, however, after global equity markets were mauled at the start of the month by worries that inflation is picking up.

Japan’s Nikkei rose 0.7 percent.

China’s SSE Composite index and the blue-chip CSI300 both pared early gains after the government seized control of acquisitive financial conglomerate Anbang Insurance, in a dramatic move that underscores Beijing’s intent to crackdown on financial risk.

The gains in Asia followed a sell-off Thursday after minutes of the Fed’s last meeting showed policy makers were confident about the economic outlook. That prompted some investors to boost the chance of faster rate hikes.

St Louis Fed President James Bullard tried to tamp down expectations of four rate hikes in 2018, instead of the widely anticipated three, saying on Thursday policymakers need to be careful not to increase rates too quickly because that could slow the economy.

The Fed had caused a so called “taper tantrum” in May 2013 when it signaled it was time to stop pumping cash into the U.S. economy, a move that created havoc in financial markets particularly Asia.

But analysts are more upbeat about the outlook for the region despite prospects of rising U.S. inflation and rates.

“Financial market volatility has not dented our constructive view on Asia’s growth outlook for this year,” said Khoon Goh Singapore-based Head of Research for ANZ.

“Higher inflation and a larger fiscal deficit in the United States will likely see U.S. bond yields move higher, but improved fundamentals in Asia mean the region is better placed to weather this than in 2013.”

Analysts expect the market to be in a “holding pattern” ahead of a slew of important U.S. January activity data on Tuesday, followed by global surveys on manufacturing activity on Thursday.

CURRENCIES

The dollar was up 0.1 percent at 106.91 yen amid rapidly shifting views in U.S. monetary policy.

The yen, which tends to benefit during times of heightened volatility or uncertainty, rose almost 1 percent overnight.

The euro dipped to $1.2303 after gaining 0.4 percent the previous day. The common currency has lost more than 0.75 percent so far this week, following its ascent to a three-year top of $1.2556 on Feb. 16.

Oil prices eased from two-week highs, as high U.S. crude exports outweighted lower crude inventories in the world’s biggest consumer of the fuel.

U.S. crude was off 3 cents at $62.74 per barrel and Brent eased 7 cent to $66.32.

Spot gold slipped 0.3 percent to $1328.05 an ounce.

Reporting by Swati Pandey;

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With Easy Ride Trial Nissan Takes New Step Toward Being Uber Competitor

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YOKOHAMA – Facing a future in which self-driving cars may curb vehicle ownership, Nissan Motor Co is taking its first steps to becoming an operator of autonomous transportation services, hoping to break into a segment set to be dominated by Uber Technologies and other technology firms.

In partnership with Japanese mobile gaming platform operator DeNA Co, the automaker will begin public field tests of its Easy Ride service in Yokohama next month, becoming among the first major automakers anywhere to test ride-hailing software developed in-house, using its own fleet of self-driving electric cars.

Easy Ride, which Nissan plans to launch in Japan in the early 2020s, is meant to feel more like a concierge service on wheels, making – for example – restaurant recommendations while the car is on the move.

The announcement follows an agreement by Nissan and its automaking partners Renault SA and Mitsubishi Motors Corp earlier this month to explore future cooperation with Chinese transportation services conglomerate Didi Chuxing.

These moves mark a push by the automaker to avoid becoming the “Foxconn of the auto industry”: a mere vehicle supplier to ride- and car-sharing companies.

“We realize that it’s going to take time to become a service operator, but we want to enter into this segment by partnering with companies which are experts in the field,” Nissan’s chief executive, Hiroto Saikawa, told Reuters in an interview this month.

A person close to the deal has said that the agreement is intended to explore opportunities for Nissan and others to supply battery-electric cars to Didi Chuxing for a new electric car-sharing service it is setting up in China.

He noted however that Nissan and its alliance partners could explore a broader agreement, which might possibly involve Nissan providing self-driving taxi technology to the dominant Chinese ride-hailing service.

NICHE MARKET

Creating an upscale autonomous taxi service, rather than trying to beat other companies on price, could help Nissan against bigger competitors like Uber, market experts say.

“By doing something with a more premium feel, it could allow Nissan to charge more for its service and potentially relieve some of that profitability pressure they could face if they were to try to race to the bottom in terms of pricing,” said Jeremy Carlson, automotive analyst at IHS Markit.

Automakers are looking for ways to profit from the rise of car-sharing services, which along with self-driving cars, are likely to lead to a decrease vehicle ownership and chip away at future profits.

IHS Markit expects global sales of autonomous vehicles will soar to more than 33 million units in 2040 from 51,000 in 2021, while Goldman Sachs has predicted that the ride-hailing market will grow eightfold by 2030 to be five times the current size of the taxi market.

Nissan has embraced new technologies, launching the Leaf, the world’s first mass-market electric car, in 2010. The company was an early proponent of self-driving cars, pledging in 2013 that it would market fully autonomous cars in 2020.

Although it has been rolling out automated highway driving functions and self-parking capabilities in a growing number of its models, rivals ranging from Tesla Inc to Subaru Corp have installed increasingly advanced self-driving features in their cars.

GM and Daimler AG are building and expanding car- sharing services, and GM has said it plans to launch a self-driving taxi service next year.

Nissan also has its own car-sharing service using its ultra-compact battery electric models, but after years of trials, the service is available only in Yokohama, home to the automaker’s headquarters.

After bringing in Ogi Redzic, who previously led the automotive business group of mapping data firm Here Technologies, to head Renault-Nissan’s mobility services division in early 2016, Nissan in the past year or so has begun to gear up its strategy to compete in the new transportation area.

Its partner DeNA is one of the world’s biggest social gaming networks with 30 million users. The company’s expertise in developing real-time user interfaces and payment systems will help give shape to the taxi service platform.

The company already operates a user-sourced car-sharing app in Japan, and had been developing a self-driving taxi system with a Japanese robotics start-up before teaming up with Nissan.

Additional reporting by Norihiko Shirouzu in Beijing

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Asia Shares Rebound As Fidgety Us Rate Fears Ebb Again

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SYDNEY – Asian shares rebounded on Friday as comments from a Federal Reserve official eased worries about faster rate rises in the United States, while the safe-haven yen held on to its gains amid heightened volatility across markets.

Financial markets have fluctuated wildly this month as investors fretted about how fast the Fed might raise rates in the wake of data showing a pick up in U.S. inflation.

Even though broader U.S. price pressures still appear modest for now, markets are now fully pricing in three rate hikes this year, one more than was seen just a few months ago, and some analysts now expect four.

That in turn has stoked anxiety that many central banks will start to tighten policy and raise borrowing costs, which will hit corporate earnings, which have boomed thanks to a synchronized uptick in global growth.

MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 1 percent, adding to the previous week’s 3.9 percent gain.

It is still down more than 4 percent in February so far, however, after global equity markets were mauled at the start of the month by worries that inflation is picking up.

Japan’s Nikkei edged 0.4 percent higher and South Korea’s KOSPI index rose 1.1 percent. China’s SSE Composite index and the blue-chip CSI300 each rose 0.7 percent.

All Asian markets except Philippines eked out gains following a sell-off on Thursday after minutes of the Fed’s last meeting showed policy makers were confident about the economic outlook. That prompted some investors to boost the chance of faster rate hikes.

St Louis Fed President James Bullard tried to tamp down of expectations of four rate hikes in 2018, instead of the widely anticipated three, saying on Thursday policymakers need to be careful not to increase rates too quickly because that could slow the economy.

That was enough to send U.S. shares rallying, despite the negative lead from Asia and Europe. On Wall Street, the Dow added 0.7 percent, the S&P 500 ended a tad firmer while the Nasdaq lost 0.11 percent.[.N]

The Fed had caused a so called “taper tantrum” in May 2013 when it signalled it was time to stop pumping cash into the U.S. economy, a move that created havoc in financial markets particularly Asia.

But analysts are more upbeat about the outlook for Asia despite prospects of rising U.S. inflation and rates.

“Financial market volatility has not dented our constructive view on Asia’s growth outlook for this year,” said Khoon Goh Singapore-based Head of Research for ANZ.

“Higher inflation and a larger fiscal deficit in the United States will likely see U.S. bond yields move higher, but improved fundamentals in Asia mean the region is better placed to weather this than in 2013.”

Analysts expect the market to be in a “holding pattern” ahead of a slew of important U.S. January activity data on Tuesday, followed by global surveys on manufacturing activity on Thursday.

(For a graphic on ‘MSCI global equities index through the year’ click reut.rs/2CDKMb6)

CURRENCIES

The dollar sagged broadly on Friday after its recovery this week faded as U.S. Treasury yields declined from their recent peaks.

Benchmark 10-year note yields were last yielding 2.9317 percent, after rising to a four-year high of 2.957 percent on Wednesday.

The euro was little changed at $1.2311 after gaining 0.4 percent the previous day. The common currency has lost 0.75 percent so far this week, following its ascent to a three-year top of $1.2556 on Feb. 16.

The yen, which tends to benefit during times of heightened volatility or uncertainty, rose almost 1 percent overnight to last fetch around 106.8 per dollar.

Oil prices hovered near two-week highs, supported by lower U.S. crude inventories, but gains were capped by a surge in U.S. exports. [O/R]

U.S. crude added 6 cents to $62.83 per barrel and Brent eased 1 cent to $66.38. Spot gold ticked lower to $1329.01 an ounce.

Reporting by Swati Pandey;

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