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- Asian shares rose on Tuesday and the dollar held steady as U.S. markets bounced back and the European Central Bank said it was prepared to ease monetary policy further. The U.S. dollar edged down after strengthening overnight on signals from some Federal Reserve officials that the central bank is likely to raise interest rates this year. The greenback slipped 0.1 percent to 95.802 against a basket of six currencies .DXY, after earlier climbing 1 percent. U.S. stocks gained overnight as St. Louis Fed President James Bullard and Atlanta Fed President Dennis Lockhart separately made the case for an increase in U.S. interest rates this year, boosting financial shares. Investors will be seeking more clarity on the Fed’s decision with a number of central bank officials, including Lockhart and Chair Janet Yellen, slated to speak this week. In Europe, ECB Chief Economist Peter Praet reiterated the bank’s readiness to modify its trillion-euro bond-buying program should economic turbulence merit action, according to an interview in a Swiss newspaper.
- Markets also took encouragement from Monday’s 1.9 percent gain in Chinese stocks, Richard Grace, chief currency and rates strategist at Commonwealth Bank of Australia in Sydney, wrote in a note. Economists polled by Reuters poll expect the flash China factory PMI to edge up to 47.5 in September from the final 47.3 in August, but that would still leave activity near 6-1/2-year lows and point to a seventh straight monthly contraction in the sector. Investors are also awaiting the euro zone’s flash manufacturing activity reading on Wednesday, which is expected to come in slightly stable to soft in September. Fears of a sharper slowdown in China sparked a heavy selloff in global markets over the past month and were cited by the Fed as one of the main factors that convinced it to keep interest rates on hold last week. China’s slowdown is already increasingly weighing on the economies of its Asian neighbors. Taiwan’s export orders — seen as an indicator of the strength of global demand for hi-tech products — contracted for a fifth month in August as demand from China and other key markets continued to deteriorate, data showed on Monday.
- Crude oil prices fell on Tuesday as traders took profit following a 3-4 percent upward swing in the previous session as conflicting market signals continued to tear at prices. Oil markets have seesawed since the beginning of the week, torn between data that points towards prices bottoming out after a more than 50 percent fall over the last year and a global glut that bearish analysts say will lead to further losses. The dip in prices came after oil rallied on Monday, with U.S crude surging nearly 5 percent on signs of declining stockpiles and a fall in drilling activity, which implies lower future oil production. A Reuters poll on Monday also forecast that U.S. crude inventories as a whole fell by 2.1 million barrels last week. In another indicator that prices may have bottomed, hedge funds continued to pare short positions in U.S. crude oil last week, a sign they no longer believe in further price falls. On the demand side, China’s implied oil demand rose 10.2 percent from a year earlier to 10.75 million barrels per day (bpd) in August, Reuters calculations using official data showed on Tuesday. August demand was also up 1.2 percent from July’s 10.62 million bpd.