· Dollar off two-month peak but on course for best week in six months
The U.S. dollar dipped from a two-month peak on Friday as renewed hopes of fresh U.S. stimulus eased investors’ concerns about its economic recovery, while the Chinese yuan gained after the country was added to a global bond benchmark.
Still, the greenback is on track for its biggest weekly gains in almost a half year, with investors not convinced if the dollar’s uptrend -- and correction in risk assets that has driven it -- has run its course.
The dollar index moved little in Asia on Friday at 94.351 . After hitting a two-month high of 94.601 in Thursday’s U.S session, the dollar retreated as stock prices got a lift on hopes that stalled U.S. stimulus talks could resume.
The index is up 1.4% this week, however, and there remain doubts over whether the U.S. can overcome divisions to agree on a package.
Further complicating the political landscape, U.S. president Donald Trump has said he would unveil his choice to replace the late Supreme Court Justice Ruth Bader Ginsburg on Saturday, a move that has drawn sharp battle lines between Republicans and Democrats.
Investors are also on edge after Trump refused to commit to a peaceful transfer of power if he lost the election.
Rises in U.S. real yields have also underpinned the dollar. The yield on 10-year U.S. inflation-protected Treasuries rose to minus 0.911%, the highest since late July.
The euro changed hands at $1.1665 after having hit a two-month low of $1.16265 on Thursday.
The dollar was little moved at 105.48 yen, staying near its highest level in over a week.
The British pound managed to stay above Wednesday’s two-month lows after Britain’s government launched scaled-back job support for workers hit by a resurgent COVID-19 pandemic. Sterling last stood at $1.2754.
The yuan gained, stemming its decline over the past week or so, after FTSE Russell announced it will add Chinese government bonds to its flagship World Government Bond Index (WGBI) starting in 2021.
The renminbi traded at 6.8122 per dollar, up slightly on the day in the onshore market. It has gained around 5% from its lows in May.
· U.S. Treasury yields rise as Democrats work on new fiscal stimulus
U.S. government debt prices were lower on Friday morning as traders monitored news of potential new fiscal stimulus in the United States.
At around 1.45 a.m. ET, the yield on the benchmark 10-year Treasury note rose to trade at 0.6692%. The yield on the 30-year Treasury bond was trading higher at 1.4077%. Yields move inversely to prices.
· U.S. coronavirus cases surpass seven million as Midwest outbreak flares up
The number of novel coronavirus cases in the United States topped 7 million on Thursday - more than 20% of the world’s total - as Midwest states reported spikes in COVID-19 infections in September, according to a Reuters tally.
According to a Reuters analysis, positive cases rose in half of the 50 U.S. states this month. Ten states have reported a record one-day increase in COVID-19 cases in September.
New cases rose last week after falling for eight consecutive weeks. Health experts believe this spike was due to reopening schools and universities as well as parties over the recent Labor Day holiday.
· Novavax starts late-stage Covid-19 vaccine trial in UK
Novavax on Thursday started a late-stage trial of its experimental Covid-19 vaccine in partnership with the UK government’s Vaccines Taskforce, sending the company’s shares up 6% after the bell.
The trial is expected to enroll and test the vaccine in up to 10,000 participants aged between 18 and 84 years over the next four to six weeks.
Data from the trial will support regulatory submissions for license in the UK, EU and other countries, the company said.
· UK public borrowing surges to fresh record high in August
British public borrowing rose to 35.920 billion pounds ($45.8 billion) in August, a record high for the month though below its peaks earlier in the financial year, as the government dealt with the economic damage from the coronavirus pandemic.
· German export expectations hit highest level since October 2018
Optimism among German exporters - who have taken a battering due to the coronavirus crisis - hit its highest level in September since October 2018, the Ifo institute said on Friday.
Ifo said its export expectations index climbed to 10.4 in September from 5.5. It said significantly more companies in the chemical and electrical equipment sectors anticipated an increase in shipments abroad in the fourth quarter.
The car industry also foresees an increase in foreign sales while makers of clothing, leather goods and shoes predict sales will decline significantly.
· ECB should look at formulation of its inflation target: Villeroy
The European Central Bank should look at how its inflation target is formulated as part of a review of its policy framework, ECB policymaker Francois Villeroy de Galhau said on Friday.
The ECB currently strives to steer inflation over the medium term to a rate “below, but close to, 2%”, but has undershot it for years despite massive injections of monetary stimulus into the economy to boost prices.
· China’s growing economic and military strength can be a ‘dilemma’ for U.S. investors
As China grows in its economic and military strength, global investors and companies operating in the country face a dilemma, according to one analyst.
“China is converting its economic growth into military power, and I think here is the true dilemma for those that seek to invest in China. It’s understanding precisely what you are investing in, what is going on here,” said Jonathan Ward, founder of advisory firm Atlas Organization.
Speaking at the inaugural Jefferies Asia Forum last week, Ward said there are many Chinese corporations — including those in the aerospace, tech and construction industries — that are “backed by the military.”
As the line between state and business blurs, it becomes harder for investors to know how much control the Chinese government has over the company, and how independent the business might be.
· China is set to join FTSE Russell’s flagship global bond index next year
Major index provider FTSE Russell said Thursday it will add Chinese government bonds to its flagship World Government Bond Index from October next year — a development that will bring billions of dollars of inflows into China.
The inclusion — which will be China’s third entry into a major global bond index — comes at a time when investors are hunting for yield in an environment of ultra-low interest rates. Several investors estimated that at least $100 billion will flow into China after its bonds debut on the FTSE Russell index.
· Japan August factory output seen rising for third month but slow recovery seen: Reuters poll
Japan’s factory output likely rose for a third straight month in August but at a slower pace, suggesting a recovery in manufacturing activity will be moderate, a Reuters poll showed on Friday.
Industrial output is expected to have risen 1.5% in August from the previous month, the poll of 17 economists showed. It had jumped a revised 8.7% in July, the fastest on record, as domestic and global demand began to slowly recover from coronavirus-induced slumps.
A business survey released this week showed factory activity continued to contract in September amid subdued demand, but new orders were falling at a much slower pace and manufacturers were more confident in the outlook.
The Reuters poll also found retail sales probably fell 3.5% in August from a year earlier, which would mark a sixth-straight month of decline, as fears of contracting the virus kept consumers at home.
· Singapore August manufacturing surges 13.7% year-on-year, beats forecasts
Singapore’s industrial output rose 13.7% year-on-year in August, beating economists’ expectations, buoyed by a 44.2% jump in electronics production, official data showed on Friday.
Economists had expected a 4.6% increase, according to the median of their forecasts in a Reuters poll. Industrial production marked its first rise after three straight months of contraction on an annual basis.
On a month-on-month and seasonally adjusted basis, industrial production increased 13.9% in August, data from the Singapore Economic Development Board showed. Economists had expected a 2.6% rise.
· As foreigners depart, Singapore sees population drop for first time since 2003
Singapore’s population has shrunk for the first time since 2003 as travel curbs and job losses brought about by the coronavirus pandemic have pushed foreign workers from the global business hub.
The overall population dropped by about 18,000 people, or 0.3%, to 5.69 million, according to an annual population report.
A sharp drop in foreigners, down 2% to 1.64 million, as well as a marginal fall in permanent residents, outweighed a modest rise in citizens, some of whom returned from overseas as the pandemic spread globally.
“These trends were largely due to COVID-19 related challenges, brought about by weak demand and travel restrictions,” the report said, citing job losses in services, a sector heavily reliant on low-paid foreign labour.
Thai
Eng