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US

Stocks pared most of their gains into the close as a rally in technology companies fizzled out.

The Nasdaq 100 notched its third straight day of losses after earlier climbing about 1%. Dip buyers helped push the S&P 500 Index higher, with defensive industries such as utilities and consumer staples among the best performers. The benchmark closed 0.16% higher at 4,359.46. The dollar rose to the highest level since November 2020, while Treasuries were little changed.

President Joe Biden and his aides scrambled to break a deadlock among Democrats that has stalled progress on his economic plans as the White House and Congress are staring down deadlines to keep the government running and avoid a default. Federal Reserve Chair Jerome Powell voiced cautious optimism that supply-chain disruptions lifting inflation would ultimately prove temporary.

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The US Treasury is likely to exhaust its ability to borrow as soon as late October, according to the Congressional Budget Office, in the latest warning to lawmakers following their failed efforts to address the debt ceiling this week (ending 1 October).

A majority of investors harbour fears of persistently high inflation, with a 20% pullback in stocks seen as more likely than a 20% rally, according to a survey of clients. Though most expected modest gains next year in the S&P 500, price pressures and a policy reversal by the Fed are big risks, according to the survey of more than 90 pension, mutual, and hedge funds this month.

A gauge of US pending home sales rebounded in August to a seven-month high as prospective buyers welcomed more attractive pricing and additional inventory. The figures suggest housing activity is firming after retreating from the record-high levels seen last year. – Bloomberg News.

The Dow Jones Industrial Average rose 0.26% to 34,390.72 and the Nasdaq Composite Index dipped 0.24% to 14,512.44.

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EUROPE

European gas futures surged to a record for a fourth consecutive day, as supplies remained stubbornly low. Meanwhile, year-ahead German and France power prices also reached new highs.

With just two days before the region’s official heating season starts, concerns remain over flows from Russia after a colder and longer winter depleted the continent’s stockpiles to the lowest in more than a decade for this time of the year.

Supply through a major transit route from the country to Germany’s Mallnow rebounded from Tuesday’s (28 September) drop, which Gazprom PJSC said was because a customer asked to receive less. However, the pipeline is still delivering lower volumes than Monday.

Tropical Storm Sam is moving slowly in a northwestward in the direction of the US East Coast, according to the Miami-based National Hurricane Center, compounding fears of more weather-based disruption that could indirectly affect Europe.

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Gas futures on the Dutch Title Transfer Facility hub increased as much as 8.9% to EUR87.50 per megawatt-hour and the UK equivalent benchmark gained as much as 11% to 217 pence per therm.

German power for next year rose to as much as EUR123.12 per megawatt-hour and the French equivalent increased to EUR127.50 per megawatt-hour on Wednesday. Both are record highs.

High gas and power prices in Europe have already forced some fertiliser and other industrial facilities to shut, and a number of UK energy suppliers have also gone bust. TotalEnergies SE Chief Executive Officer Patrick Pouyanne said the region’s gas crisis is likely to last all winter as stockpiles are lower than usual, while Rabobank warned that a cold winter will leave global storages practically empty.  – Bloomberg News.

The Stoxx 600 Europe Index climbed 0.59% to 455.03 on Wednesday.

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JAPAN

Fumio Kishida secured Japan’s premiership by showing his strength among ruling party insiders. Now, the ex-banker who has conceded some see him as boring will have to prove he can win over voters frustrated with the government’s coronavirus policies.

Kishida, 64, is set to become Japan’s prime minister after defeating a more popular reformer, Taro Kono, in an election Wednesday (29 September) to lead the long-dominant Liberal Democratic Party (LDP). While Kishida can all but guarantee that the LDP will install him as premier at a special session Monday, keeping the job will require convincing a sceptical public he deserves it in a general election within weeks.

Kishida was seen by party members as the safe choice to succeed outgoing Prime Minister Yoshihide Suga, and guide the world’s third largest economy as it seeks to rebound from the pandemic. Although the former foreign minister from Hiroshima has promised a leftward shift in spending, he has reaffirmed the government’s core monetary policies and steered clear of the more progressive social agenda outlined by Kono.

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Japanese markets, which closed just before the final result was announced, pared some losses, with Topix Index and Nikkei 225 both down 2.1%.

Kishida must prepare to guide the LDP not only through a general election that must be held by November, but an upper house poll next year. That schedule probably does not provide enough time before facing voters to make good on promises to deliver tens of trillions of yen in stimulus spending and redistribute the “fruits of growth”.

“The coronavirus has divided the hearts of the people of this country, and I want to bring back the spirit of working together as one team to overcome this national crisis,” Kishida told a post-victory news conference. “I want to put together an economic package of trillions of yen before the end of the year, to create an atmosphere where people work together.”

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Kishida pledged to appoint a younger leadership team and preserve the LDP’s majority in parliament with coalition partner Komeito. He has voiced support for the Bank of Japan’s easing programme, suggesting he will maintain the government and central bank’s joint pursuit of 2% inflation and leave Governor Haruhiko Kuroda in place for now. – Bloomberg News.

The Nikkei 225 Index opened little changed at 29,547.00 on Thursday, after tumbling 2.21% to 29,544.29 the previous session.

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MAINLAND CHINA & HONG KONG

China equity traders tormented by months of market turbulence are looking for fresh catalysts as the country heads into one of its peak seasons for consumer spending.

The nation’s stock benchmark CSI 300 is poised for its worst quarter since March last year, as Beijing’s crackdown on private enterprise, China Evergrande Group’s debt crisis, and a nationwide power crunch took a toll on stocks. Sluggish consumption has been another major concern, with health care and consumer staples leading the 7.5% plunge in the benchmark.

The upcoming National Day holiday, also known as the “Golden Week”, will provide a chance to gauge how far consumption is from bottoming out, after stringent virus controls dampened household spending.

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Here are sectors linked to holiday activities that investors are watching:

Travel: Ticket booking figures suggest domestic travel may rebound during the seven-day break, the state-run Shanghai Securities News reported. The Ministry of Culture and Tourism’s data on the number of visitors and revenues will be a way to keep a finger on the pulse, while online travel booking platforms such as Alibaba Group Holding’s Feizhu and Tongcheng-Elong Holdings will also report their reservation data.

High-end hotels, restaurants, and rural tourist attractions are seen benefiting the most as short-haul trips remain the most popular among consumers, according to the Shanghai Securities News report. Airlines, however, still face a bleak earnings outlook partly because health authorities have advised against cross-border travels. Chinese carriers are among the worst performers in the Bloomberg Asia Pacific Airlines Index this month.

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Retail Spending: Consumer shares have been in the doldrums since the Lunar New Year in February, as residents’ spending failed to match the sector’s high valuations. The CSI 300 consumer staples and discretionary sub-gauges remain about 30% down from February peaks despite a rare surge in distillers like Kweichow Moutai Co Ltd this week (ending 1 October) and a bounce in appliance stocks as property worries eased a tad.

Retail and catering revenues during the National Day holiday will likely be released by the government when the break ends. e-Commerce giants including Suning.com Co Ltd, Alibaba, JD.com Inc, and Meituan may also disclose sales during the period.

Even solid figures could offer little relief because “GDP, Covid, and inflation going into the heating season are more important,” a chief strategist said.

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Entertainment: Box office ticketing will also be a key measure, after movie-going demand was disrupted by the delta variant in summer. Ticketing platform Maoyan Entertainment and data providers including Endata may release real time sales statistics.

The holiday may offer limited respite for Macau’s gaming stocks, which are in desperate need of good news following a nearly USD20b rout triggered by concerns over Beijing’s tightening scrutiny.

The Golden Week could be “not so golden” for Macau casino operators as a typical seasonal pickup in gross gaming revenue is “unlikely to happen” this year with the city strengthening travel restrictions amid a Covid-19 outbreak, several analysts wrote in a Monday (27 September) note. A Bloomberg gauge of the gaming shares plummeted to the lowest in over a decade this week. – Bloomberg News.

On Wednesday, the Shanghai Composite Index tumbled 1.83% to 3,536.29 while the Hang Seng Index rose 0.67% to 24,663.50.

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REST OF ASIA

Vietnam’s statistics office forecasts gross domestic product (GDP) to grow 2.5% this year, far below the official target of up to 6.5%, as tough anti-virus policies have impacted almost every corner of its economy.

The outlook, provided Wednesday (29 September) by the head of GDP data at the General Statistics Office, paints an increasingly bleak picture for a nation that had earlier powered through the Covid-19 pandemic.

After successfully curbing infections during the early stages, the Southeast Asian nation now sees its export-dependent economy crippled by restrictions that are disrupting supply chains, shuttering factories, and crimping output.

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The full-year estimate comes after the statistics office earlier in the day reported that GDP in the third quarter slumped 6.17% from a year earlier, the worst performance since it started tracking the figure. That compares with a median estimate in a Bloomberg survey for growth of 1.95% and a revised 6.57% expansion in the second quarter.

Authorities have imposed tough measures for months to contain the virus, ranging from ordering factories to shut down if they cannot provide sleeping arrangements for workers to barring residents in the nation’s commercial hub of Ho Chi Minh City from shopping for food.

About 94% of the country’s companies are facing “difficulties”, Pham Dinh Thuy, head of industrial statistics, said at a briefing in Hanoi, citing supply chain disruptions, labour shortages, and higher costs for wages and worker accommodations.

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“Companies are exhausted,” Thuy said. “The government is working on multiple measures to help quickly get companies and businesses back to normal operations.”

The head of GDP statistics, Le Trung Hieu, said growth in the final quarter of the year could be 5.3%, after expanding 1.42% during the first nine months.

To meet the government’s official full-year target range of 6-6.5%, the country would need “a very high growth rate” in the fourth quarter and “that’s impossible now”, Hieu said. Growth at 2.5% for 2021 is the “most realistic” outlook, he said.

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The benchmark VN Index closed little changed at 1,339.21 on the Ho Chi Minh City Stock Exchange, erasing an earlier loss of as much as 0.8%.

Virus measures have shuttered factories across the southern economic core around Ho Chi Minh City, particularly clothing and shoe manufacturers with clients that include Urban Outfitters, Nike, and Abercrombie & Fitch. Meanwhile, some higher end technology manufacturers have been able to keep running with smaller, isolated workforces. – Bloomberg News.

Australia’s S&P/ASX 200 Index rose 0.48% to 7,231.40 at the open on Thursday, rebounding from the previous session’s 1.08% loss to 7,196.70.

South Korea’s Kospi Index opened 0.09% lower at 3,057.57 on Thursday. It slid 1.22% to 3,060.27 on Wednesday.

The Taiwan Stock Exchange Weighted Index fell 1.90% to 16,855.46.

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COMMODITIES

Oil slid as the dollar surged and after a US government report showed crude stockpiles rose for the first time in eight weeks.

Futures in New York ended the session 0.6% lower after a choppy trading session on Wednesday (29 September). A more than 4m-barrel increase in US crude stockpiles tugged futures lower, while a stronger dollar made exports of the commodity less attractive.

Oil’s advance earlier this week (ending 1 October) – and Brent’s surge above USD80.00 a barrel – reflected signs of a tighter global market amid stronger demand and rising natural gas prices. Higher energy costs this month have stoked speculation that the Organization of Petroleum Exporting Countries (OPEC) and its allies may ease supply cuts more quickly. The White House said Tuesday it is continuing to talk to OPEC and other international partners about the importance of competitive markets and doing more to support the recovery.

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Meanwhile, world oil supply is expected to be 1.2m barrels a day below demand in October, and 900,000 barrels a day in November, according to an OPEC secretariat document being reviewed by the group’s Joint Technical Committee.

In addition to the crude stockpile rise in the US last week, gasoline inventories rose for a second week and distillate inventories climbed for the first time since late August, Energy Information Administration data show. Yet, US crude exports jumped above 3m barrels a day, signalling stronger global demand.

West Texas Intermediate crude for November delivery tumbled 0.61% to USD74.83 while Brent for November settlement slipped 0.57% to USD78.64 a barrel. – Bloomberg News.

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CURRENCIES

New Zealand’s central bank is exploring the possibility of issuing a digital currency, saying the benefits it would bring include its potential use as a monetary policy tool.

“Trends in cash use and innovation in money present an opportunity for the Reserve Bank of New Zealand (RBNZ) to consider broadening central bank money to include a widely available digital form,” the RBNZ said Thursday (30 September) in documents released for public consultation. “The declining use, acceptance, and availability of cash in New Zealand, and emerging innovations in private money, namely stablecoins, make this an opportune time to consider a central bank digital currency (CBDC).”

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While developing a CBDC would require long lead times given the complexities and involve a multi-stage approach, the RBNZ said it broadly favours the idea. A digital currency should support the New Zealand dollar “as our single unit of account” and be exchanged 1-for-1 with cash, it said, adding “cash is here to stay for as long as some of us need it”.

A digital currency could also bring improvements to domestic payments’ efficiency and resilience, and enable New Zealand to take part in global initiatives that use CBDCs to improve cross-border payments, the RBNZ said.

Other central banks around the world, including the European Central Bank, are also exploring the possibility of issuing a digital currency. However, the RBNZ said a CBDC is not without challenges and requires careful consideration.

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“As with other forms of digital money, a CBDC must be operationally resilient to outages and cyber security risks, maintain data privacy, and it would need to comply with all relevant regulation,” it said. “Similarly, while a CBDC has the potential to act as a catalyst for innovation and competition in the wider money and payment ecosystem, we will have to consider the potential for it to crowd out innovation.”

The RBNZ is seeking public input on the idea until 6 December. It gave no indicative timeline for the introduction of a digital currency but said it would release an outline of the next steps by the end of April. – Bloomberg News.

On Wednesday, the US Dollar Index rose 0.61% to 94.338, the euro fell 0.73% to USD1.1598, the pound tumbled 0.81% to USD1.3427, and the yen weakened 0.41% to 111.96 per dollar.