Asian stocks slip after grim U.S. retail sales data

TOKYO (Reuters) – Asian stocks slipped on Friday after grim U.S. retail sales figures raised fresh doubts about the strength of the U.S. economy, offsetting optimism on trade talks between the United States and China.

Also casting a shadow, the White House said U.S. President Donald Trump will declare a national emergency to try to obtain funds for his promised U.S.-Mexico border wall, drawing immediate criticism from Democrats.

Japan’s Nikkei dropped 1.1 percent while MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.25 percent in early trade, with South Korea’s Kospi shedding 1.0 percent.

In the United States, the S&P 500 lost 0.27 percent on Thursday, a day after it hit a 10-week high on rising hopes that Washington and Beijing could reach a trade deal.

U.S. retail sales tumbled 1.2 percent in December, recording their biggest drop since September 2009 as receipts fell across the board.

The shockingly weak report led to economic growth estimates for the fourth-quarter being cut to below a 2.0 percent annualized rate, with the Atlanta Fed forecasting a 1.5 percent growth, much below its previous forecast of 2.7 percent about a week ago.

Kazushige Kaida, head of foreign exchange at State Street in Tokyo, said he was “very surprised” by the U.S. retail sales data.

“The extraordinary weakness, however, appears to be owing in part to the government shutdown, though the exact extent of its impact is not clear,” he said.

“It would be premature to think the U.S. economy has lost steam completely. We have to wait for figures in the next couple of months,” Kaida said.

The collapse in retail sales came along with data showing an unexpected increase in the number of Americans filing claims for unemployment benefits last week.

The closely-watched four-week average of the volatile data rose to the highest level in more than a year

That prompted Fed fund futures to price in a small chance, about 15 percent, of a rate cut this year.

U.S. Federal Reserve Governor Lael Brainard said the central bank should stop paring its balance sheet by the end of this year.

Daisuke Uno, chief strategist at Sumitomo Mitsui Bank, said the Fed “appears to be laying the ground work to end its balance sheet reduction early”.

The 10-year U.S. Treasuries yield fell to 2.655 percent, wiping out most of their rise this week.

In the currency market, the weak U.S. data dented the dollar.

The U.S. currency fetched 110.50 yen, stepping back from Thursday’s seven-week peak of 111.13.

The dollar’s weakness saved the euro from testing its 2018 low of $1.1216. The common currency stood at $1.1295 after having fallen to $1.1248 on Thursday following economic data showing Germany’s economy stalled in the fourth quarter.

The British pound slipped to $1.2800, after touching a near one-month low of $1.2773 after Prime Minister Theresa May lost a symbolic Brexit vote in parliament, weakening her hand as she seeks to renegotiate her withdrawal agreement with Brussels.

Traders are waiting for results of a meeting on Friday between the Trump administration’s top two negotiators and Chinese President Xi Jinping in Beijing.

There has been no decision to extend a March 1 U.S. deadline for a deal, White House economic adviser Larry Kudlow said on Thursday.

Oil prices found support as top exporter Saudi Arabia said it would cut crude exports and deliver an even deeper output cut.

Brent crude futures rose to as high as $64.81 per barrel, their highest level in 12 weeks, on Thursday.

U.S. crude futures rose 0.9 percent in early Friday trade to $54.89 per barrel.

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Asian shares doze in data lull, New Zealand dollar takes a dive

SYDNEY (Reuters) – Asian share markets were in a muted mood on Thursday and looked set for a sleepy session with China still on holiday and no major economic data on the diary.

MSCI’s broadest index of Asia-Pacific shares outside Japan was little moved in early trade after ending almost unchanged on Wednesday.

Japan’s Nikkei dipped 0.2 percent, while E-Mini futures for the S&P 500 were off 0.06 percent in very thin trade.

Wall Street had already snoozed through a subdued session, though disappointing revenue forecasts hammered shares of the major videogame makers.

Electronic Arts Inc tumbled 13.3 percent and Activision Blizzard Inc sank 10.1 percent.

The Dow fell 0.08 percent, while the S&P 500 lost 0.22 percent and the Nasdaq 0.36 percent.

Markets are still waiting on developments in the Sino-U.S. trade dispute after President Donald Trump offered little new to chew on in his State of the Union speech.

U.S. Treasury Secretary Steven Mnuchin said on Wednesday that he and other U.S. officials will travel to Beijing next week for trade talks, aiming to clinch a deal to avert a March 2 increase in U.S. tariffs on Chinese goods.

WE’RE ALL DOVES NOW

In currency markets, the early mover was the New Zealand dollar which slid after local data showed unemployment, job gains and wages growth all missed forecasts.

“The figures present a more modest picture of the labor market over the last year,” said Michael Gordon, senior economist at Westpac. “Soft jobs growth and hours worked increase the risk of another weak economic print in the December quarter.”

The kiwi slid to $0.6772, losing 1.6 percent in the past 24 hours, as investors narrowed the odds on a cut in interest rates. Bonds rallied hard, with two-year yields dropping 7 basis points to 1.67 percent, well below the 1.75 percent cash rate.

The Reserve Bank of New Zealand holds its first policy meeting of the year next week and markets are wagering it will take a dovish stance.

Its neighbor, the Reserve Bank of Australia (RBA), caused ripples on Wednesday when it tempered a long-standing tightening bias and indicated the next move in rates could just as well be down as up.

The Aussie dollar duly dived 1.8 percent to stand at $0.7110 and gave a broad fillip to the U.S. dollar.

The dollar index has now risen for five straight sessions to reach 96.400, recovering almost all the losses suffered after the Federal Reserve all but abandoned plans for more rate hikes.

Less lucky was the euro, which was dragged back to $1.1366 in the wake of a dismal reading on German industrial output.

The dollar could make no headway on the yen, which benefited from its own safe-haven status, and idled at 109.93.

It broad gains still put pressure on gold, which eased to $1,306.84 per ounce, slipping further from last week’s top of $1,326.30.

Oil prices were underpinned by signs of strong U.S. demand for distillate products and tightening global crude supply.

Brent crude futures gained 71 cents higher on Wednesday to settle at $62.69 and were yet to trade. U.S. crude eased 6 cents in Asia to $53.95 a barrel.

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Asian stocks extend gains on firm Wall Street, Fed outlook

TOKYO (Reuters) – Asian stocks extended gains on Tuesday as overnight strength on Wall Street and the Federal Reserve’s cautious turn underpinned appetite for riskier assets, while the dollar held firm on last week’s upbeat U.S. data.

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.4 percent and hovered near its four-month high marked on Friday.

Japan’s Nikkei average .N225 was flat on the day but at its highest level in seven weeks.

Australian shares jumped 2.2 percent, with long-battered financials surging on short-covering after a special government-appointed inquiry excoriated Australia’s financial sector for misconduct but left the structure of the country’s powerful banks in place.

Elsewhere in Asia, trade was light, with markets in greater China, Taiwan, South Korea, Singapore and Indonesia all closed for the Lunar New Year.

On Wall Street, the S&P 500 gained, with technology and industrials the biggest winners as investors braced for another big week of fourth-quarter corporate earnings reports.

After the bell, Google operator Alphabet fell about 3 percent as its higher spending in the fourth-quarter worried investors even as its revenue and profits beat the Street’s expectations.

MSCI’s gauge of stocks across the globe reached a two-month high, having risen more than 13 percent from its near two-year low late in December, helped by the Fed’s change of tack.

Fed Chairman Jerome Powell has signaled its three-year tightening drive may be coming to an end amid a suddenly cloudy outlook for the U.S. economy due to global growth concerns and the U.S.-China trade dispute.

The Fed said in a statement that Powell had told President Donald Trump and Treasury Secretary Steven Mnuchin late on Monday that “the path of policy will depend entirely on incoming economic information.”

Data announced on Friday showed U.S. job growth surged in January while a key gauge of U.S. manufacturing sector showed surprising resilience after December’s shocking fall, allaying fears the U.S. economy might be losing momentum quickly.

Hiroshi Nakamura, senior manager of investment planning at Mitsui Life Insurance, said financial markets’ positive reaction to the U.S. data is diminishing with time, but hopes for a U.S.-China trade deal “will continue to support markets until the two sides come to formal decisions”.

The dollar was on a firm footing as investors continued to lap-up Friday’s strong payrolls number and a manufacturing survey.

The dollar’s index against six major currencies was little changed at 95.833, having gained 0.27 percent on Monday.

The euro was also steady at $1.1436, off three-week high of $1.15405 set on Thursday.

The greenback firmed to 109.98 yen , having risen to 110.165 overnight, its highest level in five weeks.

The British pound barely moved and was at $1.3038.

On Monday, sterling quickly erased brief gains following a newspaper report that goods shipped to Britain from the European Union could be waved through without checks in the event of a “no-deal” Brexit.

The Australian dollar gained 0.3 percent to $0.7247, erasing earlier losses, following the Reserve Bank of Australia left policy unchanged at its first meeting of this year but sounded less dovish than expected.

Earlier on Tuesday, it fell as much as 0.5 percent after a slump in retail sales reinforced concerns about slowing growth in Australia.

In commodity markets, oil prices inched up, buoyed by expectations of tightening global supply amid U.S. sanctions on Venezuela and production cuts led by OPEC.

U.S. West Texas Intermediate (WTI) crude futures rose 0.5 percent to $54.82 a barrel, after hitting a 2-1/2-month high of $55.75 in the previous session, while Brent crude futures were last up 0.4 percent at $62.77.

Gold prices held near one-week lows hit in the previous session, pressured by a firmer dollar and as investor appetite for riskier assets picked up.

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Stocks rally on U.S. economic data, bond yields rise

NEW YORK (Reuters) – Global equity markets and bond yields rose on Friday after U.S. employment and manufacturing data underscored a strong economy with little wage inflation, a Goldilocks mix that could allow the Federal Reserve to stand pat on raising interest rates soon.

U.S. job growth surged in January, with employers hiring the most workers in 11 months, the Labor Department said, while the U.S. ISM manufacturing index rose more than consensus estimates as its “prices paid” index slipped more than expected.

Prices in the U.S. futures markets show traders see no rate hikes ahead, though short-term futures indicate they remain convinced the U.S. central bank’s next move will be a rate cut rather than a hike.

Stocks resumed a rally that pushed many equity markets to post their best January in years. MSCI’s gauge of stocks across the globe gained 0.12 percent, while the pan-European STOXX 600 index rose 0.21 percent.

The strong jobs number and little inflation smacked of a Goldilocks economy that is not overheating or too cold to fall into recession. The Fed may hike one more time in 2019, but after its policy statement on Wednesday urging patience, that would happen only in the second half of the year, said Yousef Abbasi, global market strategist at INTL FCStone Financial Inc in New York.

“The story being told here is the economy is healthy but inflation continues to face challenges,” he said. “This makes even more a compelling argument for the stock market.”

The Dow Jones Industrial Average rose 146.6 points, or 0.59 percent, to 25,146.27. The S&P 500 gained 7.3 points, or 0.27 percent, to 2,711.4 and the Nasdaq Composite added 1.17 points, or 0.02 percent, to 7,282.91.

Exxon Mobil Corp rose 4.01 percent and Chevron Corp jumped 3.12 percent after the oil majors reported better-than-expected quarterly profits, boosting the Dow Jones industrial index.

Amazon.com Inc fell 4.35 percent after its quarterly sales forecast fell short of Wall Street estimates, overshadowing its record sales and profit during the holiday season.

While fourth-quarter results have mostly beaten expectations, there have been 27 negative earnings pre-announcements issued by companies in the S&P 500 index, compared with nine positive, data from Refinitiv shows.

The negative to positive ratio is now 3.0, which is above the long-term average of 2.7 and above the prior four-quarter average of 1.5, Refinitiv said.

The data suggests slower U.S. growth and adds to a growing list of economic readings indicating slowing global growth. The Caixin/Markit index of Chinese manufacturing fell to its lowest since February 2016.

Oil prices rose, lifted by signs the United States and China could soon settle their protracted trade dispute, while producer cuts and U.S. sanctions on Venezuelan exports helped tighten supply.

International Brent crude oil futures rose $1.18 to $62.02 per barrel. U.S. West Texas Intermediate (WTI) futures added 96 cents to $54.75.

The dollar index fell 0.1 percent, with the euro up 0.24 percent to $1.1472. The Japanese yen eased 0.51 percent versus the greenback at 109.46 per dollar.

“The big news of the week is the tone of the Fed has turned a bit dovish. The outlook for a tightening phase has come to an end,” said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California.

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Asia stocks scale four-month peak as Fed turns more cautious; dollar sags

TOKYO (Reuters) – Asia stocks rose to a four-month high on Thursday after the Federal Reserve pledged to be patient with further interest rate hikes, signaling a potential end to its tightening cycle amid signs of slowing global growth.

The dollar struggled near a three-week trough against its major peers and U.S. Treasury yields were significantly lower as investors reacted to the Fed’s change in tone.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose to its highest since Oct. 4 and was last up 0.7 percent.

Japan’s Nikkei rose 0.9 percent.

The Shanghai Composite Index climbed 0.8 percent despite data showing China’s factory activity contracted for a second straight month amid weakening orders.

Australian stocks edged up 0.1 percent.

The Fed on Wednesday held interest rates steady as expected, and also discarded its promises of “further gradual increases” in interest rates.

The central bank said it would be “patient” before making any further moves amid a suddenly cloudy outlook for the U.S. economy due to global growth risks and impasses over trade and government budget negotiations.

On Wall Street, the Dow and the Nasdaq rallied 1.7 percent and 2.2 percent, respectively, on hopes the Fed’s pause would give the U.S. economy and corporate profits more room to run.

Late in December the Dow had sunk to its lowest level since September 2017, dogged by factors including worries over cooling economic growth and trade tensions, adding pressure on the Fed to reassess its tightening bias.

“The Fed’s statements firmly confirmed its dovish stance, which had already been on display at the start of the year. Market concerns towards the Fed’s rate hikes have now been put to rest,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.

“The mention of the balance sheet by the Fed was a positive surprise. The focus now shifts immediately to U.S.-China trade talks, but the equity markets could have enough cushioning to withstand negative news from the talks.”

The U.S. central bank also said on Wednesday that its balance sheet would remain larger than previously expected.

However, while market expectations for Fed tightening may have waned significantly, some analysts suggested rate hikes still remained a near-term possibility.

“While many of the risks to the U.S. outlook remain in place, there is little to suggest that the outlook has changed by as much as the Fed communication says it has,” wrote Michael Gapen, chief U.S. economist at Barclays.

“We worry that the Fed has traded near-term support for financial markets and the economy for another round of volatility later this year if it is forced to lift rates higher, which remains more likely than not, in our view.”

With the Fed decision out of the way, investors focused their attention on a pivotal round of high-level U.S.-China trade talks which began on Wednesday aimed at easing a months-long tariff war.

The two-day talks in Washington are expected to be tense, with little indication so far that Chinese officials are willing to address core U.S. demands to fully protect American intellectual property rights and end policies that Washington has said force U.S. companies to transfer technology to Chinese firms.

If the two sides cannot reach a deal soon, Washington has threatened to more than double tariffs on Chinese goods on March 2.

In currencies, the dollar index against a basket of six major currencies struggled near a three-week low of 95.253 brushed on Wednesday, when it had sunk 0.5 percent.

A weaker dollar helped nudge the euro to $1.1501 on Wednesday, its highest since Jan. 11, and the common currency was last up 0.15 percent at $1.1493 .

The greenback was down 0.15 percent at 108.88 yen and close to a two-week low of 108.81 reached overnight.

The pound was steady at $1.3117 , given some reprieve after slipping earlier in the week when British lawmakers voted down a proposal in parliament that could have prevented a potentially chaotic “no-deal” Brexit.

The benchmark 10-year U.S. Treasury yield extended its decline to as far as 2.674 percent, its lowest since Jan. 14.

Oil prices rose after U.S. government data showed signs of tightening supply and as investors remained concerned about supply disruptions following U.S. sanctions on Venezuela’s oil industry.

U.S. crude oil futures were up 0.7 percent at 54.59 per barrel.

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Asian shares go flat as China data disappoints

SYDNEY (Reuters) – Asian shares crept back from four-month highs on Friday as a dismal survey on Chinese factory activity dulled optimism about the prospects for a Sino-U.S. deal on tariffs.

The Australian dollar, a liquid barometer of investor sentiment toward China, skidded 0.5 percent after the Caixin/Markit index of manufacturing fell to its lowest since February 2016. That was more downbeat than the official version of the index and inflamed fears for the economy.

Investor caution is also mounting ahead of U.S. jobs data later in the session with analysts unsure what impact the government shutdown might have had employment.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.2 percent, though that followed a stellar 7.2 percent gain in January.

Japan’s Nikkei went flat, while Shanghai blue chips held onto a 0.7 percent gain. E-Mini futures for the S&P 500 eased 0.1 percent and spread betters pointed to a marginally mixed start for European bourses.

Stocks had taken heart after U.S. President Donald Trump said he would meet with Chinese President Xi Jinping soon to try to seal a comprehensive trade deal as the top U.S. negotiator reported “substantial progress” in the talks.

Beijing’s trade delegation said the talks made “important progress” for the current stage, China’s official Xinhua news agency reported on Friday.

The previously upbeat mood was also chilled somewhat by White House insistence that March 1 was a hard deadline for a deal, a failure of which would lead to an increase in U.S. tariffs on Chinese goods.

“Analysts mostly remain deeply skeptical that a genuine trade deal can be done on this time frame,” economists from Commonwealth Bank of Australia said in a note.

“We are less pessimistic since these negotiations are being conducted by senior politicians, not by trade bureaucrats,” they added. “Both sides also have an incentive, and arguably a growing incentive, to get a meaningful deal done.”

The optimism supported Wall Street with the S&P 500 ending Thursday with a gain of 0.86 percent. The Nasdaq jumped 1.37 percent on the back of a near 11 percent rise in Facebook Inc. The Dow slipped 0.06 percent.

Over January, the S&P 500 rose 7.9 percent, its best monthly performance since late 2015 and its strongest start to a year since 1987. The Nasdaq gained 9.7 percent in the month and the Dow rose 7.2 percent.

FED’S ABOUT-FACE

Equity markets have also been relieved by a change of heart at the U.S. Federal Reserve, which this week surprised many by all but abandoning plans for further rate hikes.

Investors responded by pricing in a one-in-three chance that interest rates could actually be cut this year.

Yields on two-year Treasuries were down almost 15 basis points on the week so far, which if sustained would be the largest weekly decline since mid-2010.

That in turn has been a drag on the U.S. dollar, though it was off its lows on Friday. It was down 0.6 percent so far this week against the yen at 108.85, but found some support around 108.50.

Against a basket of currencies, the dollar was a fraction firmer at 95.622 thanks in part to a pullback in the euro to $1.1439.

The single currency had taken a knock when Bundesbank president Jens Weidmann painted an unusually bleak picture of the German economy, saying the country’s slump will last longer than initially thought.

Gold prices hovered just short of nine-month highs supported by the fall in bond yields and expectations for a softer dollar. Spot gold stood at $1,318.44 per ounce, having touched a top of $1,326.30.

Oil prices were subdued as the poor China data offset signs major exporters were quickly reducing output in line with a pact to cut supply.

U.S. crude futures edged up 5 cents to $53.87 per barrel, while Brent rose 13 cents to $60.97. [O/R]

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Stocks surge on Fed pledge to pause, dollar slips

NEW YORK (Reuters) – The dollar slid and equities surged on Wednesday, fueled at first by Boeing and Apple’s results and later by the Federal Reserve pledging to be patient with future interest rate hikes, a change in tone stock investors interpreted as a buy signal.

The Fed held interest rates steady at the end of a two-day meeting in which it struck language in a December policy statement that projected “some further” rate hikes would be appropriate in 2019.

U.S. stocks extended their gains and bond yields fell as markets got what they were hoping for, said Mohamed El-Erian, chief economic adviser at Allianz in Newport Beach, California.

“This marks a full 180 from what the Fed was signaling just a few months ago,” El-Erian said.

Scott Minerd, global chief investment officer at Guggenheim Partners in Santa Monica, California, said the Fed’s pause will further extend the economic expansion, allowing excesses to continue to build and increasing risks of financial instability.

“The Fed refilled the punch bowl and the party goes on. Buy risk assets,” Minerd said.

The MSCI world equity index, which tracks share performance in 47 countries, rose 1.39 percent following gains in Asia overnight. The FTSEurofirst 300 index of leading shares in Europe closed up 0.41 percent.

The Dow Jones Industrial Average rose 524.73 points, or 2.13 percent, to 25,104.69. The S&P 500 gained 50.13 points, or 1.90 percent, to 2,690.13, and the Nasdaq Composite added 172.63 points, or 2.46 percent, to 7,200.92.

Upbeat results from Boeing and Apple late on Tuesday provided investors early relief as they awaited the Fed statement and as U.S.-China trade talks started in Washington.

Boeing shares jumped after the world’s largest planemaker raised its profit and cash flow expectations for 2019 amid a boom in air travel. Boeing also indicated it had overcome supplier delays that snarled 737 production last year.

Apple results provided some reassurance as the iPhone maker reported sharp growth in its services business.

Boeing shares rose 6.63 percent and Apple gained 7.31 percent.

Oil prices rose, paring gains of more than 1 percent, as the potential for supply disruptions following U.S. sanctions on Venezuela’s oil industry lifted prices.

Stocks listed in London jumped more than 1 percent after British lawmakers late on Tuesday rejected a proposal in Parliament that aimed to prevent a potentially chaotic “no-deal” Brexit, a vote that initially pushed sterling sharply lower.

The exporter-heavy FTSE 100 in London rose 1.45 percent as its components often are boosted by a weaker pound because its multinational companies earn a large portion of their revenue abroad in foreign currency.

Sterling rose 0.04 percent to $1.3071 after sliding about 0.7 percent against the dollar and the euro following parliamentary votes on Brexit.

“The vote is not fundamentally changing the way the market’s talking about Brexit,” said Hetal Mehta, Legal & General Investment Management senior European economist.

Payrolls processor ADP reported that the U.S. private sector added 213,000 jobs in January, which beat forecasts for gains of 178,000. But the monthly total was lower than the 271,000 jobs added in December.

The dollar index fell 0.50 percent to 95.343. Against the yen, the dollar fell 0.44 percent to 108.90.

The euro gained 0.53 percent to $1.1491.

Benchmark 10-year U.S. Treasury notes rose 4/32 in price to push yields down to 2.6954 percent.

U.S. West Texas Intermediate crude futures gained 92 cents to settle at $54.23, while international Brent crude futures rose 33 cents to settle at $61.65 per barrel.

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Asian shares inch up after Apple earnings, CEO comments

TOKYO (Reuters) – U.S. stock futures and Asian equities eked out modest gains on Wednesday as investors seized on Apple Inc’s earnings and comments from its chief that U.S.-China trade tensions were easing, sending the iPhone maker’s shares soaring in after-hours trade.

Sterling smarted from a 0.7 percent fall the previous day after British lawmakers rejected most amendments that sought to avoid Britain leaving the European Union without a deal, reviving worries of a chaotic withdrawal from the European Union.

S&P 500 e-mini futures tacked on 0.1 percent in early trade while MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.05 percent

Japan’s Nikkei rose 0.2 percent before erasing gains.

On Tuesday Wall Street shares dipped, with S&P 500 losing 0.15 percent as technology-related shares were dogged by a string of weak earning results while a rebound in 3M and other industrials helped the Dow Jones Industrial Average squeeze out small gains.

Apple shares rose 5.7 percent after the bell as the iPhone maker reported sharp growth in its services business.

Investors were relieved that there was no fresh bad news after the company shocked financial markets at the start of this month when its rare revenue warning sparked fears the U.S.-China trade tensions are taking a toll on the once high-flying tech sector.

CEO Tim Cook, who is in regular contact with U.S. President Donald Trump, also said trade tension between the United States and China is easing in January.

That helped to boost optimism around current high-level trade talks between the two countries, even though many investors remain skeptical whether the economic giants can bridge their differences over a number of issues, including intellectual property rights and technology transfers.

China’s Vice Premier Liu He is in Washington this week to meet U.S. officials, including Trump.

U.S. Treasury Secretary Steve Mnuchin said on Tuesday he expected to see significant progress in talks with Chinese officials and that U.S. charges against telecommunications giant Huawei Technologies Co Ltd were a separate issue.

“It seems December was the worst month and since then things might be starting to recover a bit. If we can see more such evidence, market sentiment will be bolstered,” said Nobuhiko Kuramochi, chief strategist at Mizuho Securities.

“Yet, it’s still not clear how strong any such recovery would be. I would bet markets will be range-bound from here,” he said.

Investors are also looking to the outcome of the Federal Reserve’s rates review later in the day, with expectations policymakers will reinforce their recent dovish stance given signs of a slowdown in the U.S. economy.

In the currency market, the British pound fell 0.67 percent on Tuesday and was last up 0.1 percent at $1.3078, off three-month highs of $1.3218 touched on Friday.

British lawmakers on Tuesday instructed Prime Minister Theresa May to reopen a Brexit treaty with the European Union to replace a controversial Irish border arrangement – and promptly received a flat rejection from Brussels.

“The possibilities of no Brexit and of an extension of the Article 50 deadline have fallen. Markets may be under-estimating the chances that we could have a hard Brexit,” said Takafumi Yamawaki, head of Japan FX and rates research at JPMorgan Securities.

Other currencies were little moved. The euro changed hands at $1.1438, having risen to a two-week high of $1.14505 on Tuesday.

The dollar was steady against the yen at 109.37 yen.

In contrast, gold rose to 8-1/2-month highs of $1,312 per ounce, helped by flight-to-quality bids.

Oil prices held firm after the United States imposed sanctions on state-owned Venezuelan oil company PDVSA, a move likely to reduce the OPEC member’s crude exports and relieve some global oversupply worries.

U.S. crude futures rose more than 2 percent on Tuesday and last stood at $53.21 per barrel.

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Gold reaches seven-month high as dollar struggles

LONDON (Reuters) – Gold climbed to a seven-month high on Tuesday and stocks were back on the up too, as investors dug in for three days of political and economic drama and a blizzard of big tech earnings, starting with Apple later.

The main European and Asian markets held up well ahead of potentially galvanizing events including a key Brexit vote on Tuesday, Wednesday’s U.S. Federal Reserve decision and Thursday’s conclusion of the latest Sino-U.S. trade talks.

London’s FTSE rose 1.3 percent and Frankfurt and Paris both made ground, driven by utilities, healthcare, miners and other defensive stocks.

Wall Street futures were also higher after series of profit alerts, including from digger maker Caterpillar, and U.S. charges against China’s telecom giant Huawei, sparked one of the S&P 500’s worst days of the year on Monday.

For Asia, the blow had been cushioned by promises of more Chinese stimulus but Beijing had also berated Washington for blocking tactics in its World Trade Organisation appeal against U.S. tariffs.

Amid the turmoil, safe-haven gold broke through $1,310 an ounce to reach its highest since May last year.

“Investors are very cautious, with many uncertainties on U.S.-China trade talks and Brexit. Huawei is at the center of the dispute, creating a very noisy background for the trade talks,” said Margaret Yang, a market analyst at CMC Markets.

“All these are making it more difficult for investors to judge the market’s direction. Money is fleeing into assets such as gold, seeking safety.”

The Sino-U.S. moves, as well as bets that the Fed will sound more cautious on Wednesday, saw the dollar set a new two-week low and heightened the safe-haven appeal of the Japanese yen and the Swiss franc.

It lifted the euro too, while sterling held steady at $1.3166 and 86.88 pence to the euro before crucial parliamentary votes later aimed at breaking a deadlock over the manner of Britain’s exit from the European Union on March 29.

There were plenty of pre-vote twists. Prime Minister Theresa May told her senior ministers that in order to win parliament’s support for her Brexit deal, the agreement she negotiated with Brussels would have to be reopened.

“The prime minister said that in order to win the support of the House of Commons legal changes to the backstop will be required, that would mean reopening the Withdrawal Agreement (with the EU),” May’s spokesman told reporters.

The main opposition Labour Party meanwhile said it was telling its lawmakers to vote for a plan that could give parliament the power to delay Brexit.

WARNING BELLS

Initial U.S. calls in a bumper day of results showed Xerox rising 5.8 percent in premarket trading after beating profit estimates, while Pfizer fell 1.7 percent and Harley-Davidson Inc plunged about 8 percent.

Apple, which has already issued a profit warning this month due to weak demand from China, is due to report after the bell too.

Most European government bond yields were little changed. Weaker economic data and unknowns like the trade feuds and Brexit have all boosted expectations that interest rates will stay low.

New debt deals from Greece, Belgium and Austria were also coming through. The slide in rates has also encouraged governments to launch new bond deals. Even Angola, which has just taken IMF aid, said it was eyeing a bond sale.

Asia had been more mixed, with losses for Australia and New Zealand stocks but Japanese and Chinese stocks both turned around early falls to finish higher.

Markets will have plenty more catalysts this week with over 100 of the S&P500 companies reporting results, including other top tech firms such as Amazon, Microsoft and Facebook.

Overnight on Wall Street, the Dow and S&P 500 each closed down 0.8 percent and the Nasdaq was off more than 1 percent.

The losses came after Caterpillar and Nvidia Corp joined a growing list of companies cautioning about the crippling effects of softening Chinese demand.

“Both companies are seen as industry bellwethers, and their disappointing results provide further evidence that this time China’s slowdown is for real,” said Rodrigo Catril, Sydney-based strategist at National Australia Bank.

Worryingly, earnings at China’s industrial firms too shrank in December, pointing to more troubles for the country’s vast manufacturing sector, already struggling with a decline in orders, job layoffs and factory closures.

Oil recovered after overnight losses. U.S. crude was last up 45 cents at $52.44 a barrel, while Brent gained 68 cents to $60.61.

Washington imposed sanctions on Venezuelan state-owned oil company PDVSA on Monday, a step that is likely to curb its crude exports to the U.S. and ratchet up the pressure on President Nicolas Maduro.

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World markets slip on China worries; dollar steady ahead of trade talks

LONDON (Reuters) – World shares fell into the red on Monday, with equities markets from Asia to Europe buffeted as Chinese industrial profits fell and investors stayed cautious ahead of a busy week including Sino-U.S. trade talks and the Federal Reserve’s policy meeting.

Major European bourses fell in early trade, mirroring a retreat for Asian stocks as concerns over Chinese growth outweighed any boost from the tentative end to the U.S. government shutdown late last week.

Investors also braced for another major twist in Britain’s exit from the European Union, with crucial votes due on Tuesday in the British parliament designed to break the Brexit deadlock.

The MSCI world equity index, which tracks shares in 47 countries, fell 0.1 percent, while MSCI’s main European Index dropped 0.5 percent. The broader Euro STOXX 600 also fell 0.4 percent.

“A slowdown in the Chinese economy could be sometimes taken as an idiosyncratic event which would be dealt with by Beijing,” said Philip Shaw, chief economist at Investec.

“It’s pretty clear that the current situation is more global, in terms of the tariff tension between the U.S. and China and the threat of that dispute spilling over more widely.”

Earnings at China’s industrial firms shrank for the second straight month, suggesting trouble ahead for manufacturers struggling with falling orders, job layoffs and factory closures amid a protracted trade war with the United States.

Investors are now waiting for Chinese Vice Premier Liu He’s visit to the United States on Jan. 30-31, for the next round of trade negotiations with Washington.

But with the sides still far from resolving trade issues, the dollar stood firm as traders sought a safe haven as they await news from U.S.-China talks on Tuesday and Wednesday.

The dollar index, a gauge of its value versus six major peers, was flat at 95.801.

“In this environment the dollar was holding up well,” said Thu Lan Nguyen, a forex strategist at Commerzbank. “I assume that this will continue to be the case, even as the conflict intensifies at the end of the week,” she said, referring to the talks.

The dollar will also get a strong steer from this week’s Fed meeting, where the central bank is expected to signal a pause in its tightening cycle and to acknowledge growing risks to the world’s biggest economy.

Though the Fed has forecast two more interest rate hikes for 2019, a darkening global economic outlook and highly volatile stock markets have clouded the policy picture.

BREXIT VOTES

Elsewhere in currencies, sterling drifted lower as investors consolidated positions ahead of crucial votes in the British parliament designed aim to break the Brexit deadlock.

The British currency edged down a quarter of a percent lower to $1.3164.

Lawmakers earlier this month rejected Prime Minister Theresa May’s EU withdrawal agreement, which included a nearly two-year transition period to help minimize economic disruption. That defeat set up a series of votes on Tuesday through which lawmakers and the government will try to find a way forward.

Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan was flat, with bourses in Shanghai, Hong Kong, Tokyo and Seoul all losing ground.

Brent crude futures were down 1.8 percent, at $61.01 a barrel.

Oil prices fell amid signals that crude output may rise further, and worries grew over the signs of economic slowdown in China, the world’s second-largest oil user.

Gold was slightly down. Spot gold was down 0.2 percent at $1,300.56 per ounce, hovering just below a more than 7-month high of $1,304.40 reached earlier in the session.

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