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- Asian shares rose to 2-month highs on Thursday and the dollar struggled near multi-week lows after weak U.S. economic data added to expectations that the Federal Reserve will delay hiking interest rates. Japanese manufacturers’ confidence worsened for the second straight month in October and is expected to fade going forward, a Reuters poll showed, adding to lingering fears of a recession and keeping policymakers under pressure to deploy fresh stimulus.
- The dollar wallowed around seven-week lows against a basket of currencies in Asian trading on Thursday, after weak U.S. sales data prompted investors to scale back bets that the U.S. Federal Reserve would hike interest rates by the end of 2015.U.S. retail sales and producer prices data out on Wednesday were weaker than expected, supporting growing views that the Federal Reserve would delay hiking interest rates until 2016. With inflation falling and consumer spending stagnating, it will be very difficult for the Federal Reserve to pull the trigger this year. The economy could regain momentum in November or December but a significant turnaround would be needed to shift market expectations. European Central Bank Vice President Vitor Constancio said a rate hike by the Fed could have greater global repercussions than in the past because the economy has changed and central banks have little experience moving away from interest rates of zero. Also on Wednesday, the Fed’s Beige Book showed the U.S. economy grew at a modest pace, keeping alive hopes that the U.S. central bank is on track to eventually raise interest rates for the first time since 2006. U.S. interest rates futures implied traders see about a 1-in-4 chance the Fed would raise rates by year-end, according to CME Group’s FedWatch program. The U.S. central bank will hold two more policy meetings in 2015, on Oct. 27-28 and Dec. 15-16. The Fed opted to hold policy steady last month as policymakers fretted that a slowing global economy, particularly China, might threaten the U.S. economic outlook. Figures released on Wednesday showed the pace of China’s consumer inflation growth slowed.
- Crude oil futures extended their losses on Thursday after notching up declines every day so far this week, hit by growing U.S. stockpiles and an expanding global glut. Data from industry group the American Petroleum Institute on Wednesday showed that U.S. crude inventories rose by 9.4 million barrels in the week to Oct. 9 to 465.96 million, compared with analyst expectations for an increase of 2.8 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 1.4 million barrels, API said. BMI Research, part of the Fitch ratings agency, said in a note that China’s crude oil imports would continue to grow over the next five years at an average annual rate of 3.2 percent.
- A rate hike by the Federal Reserve could have greater global repercussions than in the past because the economy has changed and central banks have little experience moving away from interest rates of zero, European Central Bank Vice President Vitor Constancio said. A Fed hike would have a bigger impact because emerging markets, particularly China, are now integrated in the global economy to an unprecedented degree, countries are more interlinked in production, cross-border capital flows have increased, and forward guidance has become a crucial monetary policy instrument, Constancio said on Thursday.