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July 20, 2018

Asia stocks subdued as European trade fears flare, Trump comments hit dollar

Asia stocks subdued as European trade fears flare, Trump comments hit dollar
A man looks at an electronic board showing stock information at a brokerage house in Shanghai, China July 6, 2018. REUTERS/Aly Song

By Shinichi Saoshiro

TOKYO (Reuters) – Asian stocks eked out modest gains on Friday as investor caution prevailed amid concerns about the European Union imposing retaliatory tariffs on U.S. goods while U.S. President Donald Trump’s criticism of Federal Reserve policy knocked the dollar.

MSCI’s broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) inched up 0.1 percent.

Australian stocks (AXJO) added 0.5 percent and South Korea’s KOSPI (KS11) edged up 0.07 percent. Japan’s Nikkei (N225) reversed earlier modest losses to rise 0.2 percent, lifted as the dollar came off lows versus the yen.

Officials from the EU Trade Commission, due to arrive in Washington next week for trade talks, are said to be preparing a list of tit-for-tat actions in response to proposed U.S. tariffs on EU cars.

“The latest trade headlines have drawn attention as they come from Europe,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo. “So any action by the EU will not come into effect right away, and negative responses by the equities could peter out after one or two days with the markets regaining calm.”

Wall Street shares declined overnight amid the latest flare up in trade tensions, with the Dow (DJI) shedding 0.53 percent and the S&P 500 declining 0.39 percent (SPX). (N)

But the Dow has gained about 0.2 percent this week during which it touched a one-month high thanks to strong corporate earnings.

U.S. equities were also supported this week after Federal Reserve Chairman Jerome Powell expressed confidence in the U.S. economy and affirmed expectations that the central bank was on track to keep hiking interest rates gradually.

However, comments from President Trump criticizing Fed policy and expressing concern about the potential impact of rising rates and a stronger dollar on the U.S. economy and American corporate competitiveness hosed down the greenback’s recent rally.

The dollar pulled back from a recent one-year high against most of its peers earlier on Thursday after the comments.

Later, the White House said in a statement that Trump respects the Fed’s independence and was not interfering with its policy decisions.

The dollar index against a basket of six major currencies stood little changed at 95.151 (DXY) after being knocked down from 95.652, its highest level since July 2017.

The euro edged up 0.1 percent to $1.1655 (EUR=), lifted from a three-week trough of $1.1575 set overnight. The single currency has lost about 0.2 percent this week.

The greenback was, however, up 0.1 percent at 112.57 yen after going as low as 112.35 earlier in the session. It has been knocked away from one-year peak of 113.18 scaled on Thursday. It was still up 1.7 percent on the week, boosted earlier after Fed’s Powell reinforced expectations for gradual, steady rate increases.

Brent crude futures (LCOc1) rose 0.3 percent to $72.80 a barrel as the dollar flagged, trimming some of their overnight losses. [O/R]

A weaker dollar makes greenback-denominated commodities like oil less expensive for holders of other currencies.
July 19, 2018

Asian shares rise on U.S. earnings but trade worries rattle yuan

Asian shares rise on U.S. earnings but trade worries rattle yuan
Asian shares rise on U.S. earnings but trade worries rattle yuan

By Tomo Uetake

TOKYO (Reuters) - Asian shares extended early gains on Thursday as upbeat Wall Street earnings buoyed global investor sentiment, although trade war jitters pushed China's yuan to fresh one-year lows in both the onshore and offshore markets.

The dollar retreated from a three-week high as investors cashed in on gains the currency made after U.S. Federal Reserve Chairman Jerome Powell's two-day testimony reinforced a strong economic outlook.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.32 percent, while Japan's Nikkei and the Australian benchmark advanced 0.30 percent and 0.40 percent, respectively.

Bucking the regional rally, the Shanghai Composite index declined 0.13 percent and the technology-heavy Shenzhen Composite shed 0.43 percent.

"While strong U.S. corporate earnings certainly helped boost sentiments, but that's not enough to push the stocks meaningfully higher from here," said Yasuo Sakuma, chief investment officer at Libra Investments.

On Wall Street, the Dow Jones Industrial Average rose 0.32 percent and the S&P 500 gained 0.22 percent to hit a more than five-month high, while the Nasdaq Composite declined marginally by 0.01 percent.

Stock markets were also supported by the Powell reiterating that the U.S. economy was healthy, even though he warned that rising world protectionism would over time pose a risk to the global economic expansion.

In the foreign exchange market, worries about the trade war between the United States and China kept the offshore yuan at 6.7695 per dollar and its onshore counterpart at 6.7408, both hitting their lowest levels since July 2017.

"Market players are looking at both the onshore and offshore exchange rate to determine whether or not the People's Bank of China is intentionally allowing a weaker yuan," said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

"If the difference between the two markets becomes too big, that could mean the PBOC is intervening in the market."

She noted that although the current spread between offshore and onshore yuan had widened recently, it was still far from the levels it hit during the Chinese financial market shock in 2015 when the central bank was seen intervening heavily.

The dollar index against a basket of six major currencies, rose to a three-week high of 95.4 and against the yen, the dollar hit a 6-1/2 month high of 113.140 yen on Wednesday.

In his two-day congressional testimony, the Fed's Powell said he believed the United States was on course for years more of steady growth, and played down the risks to the U.S. economy of an escalating trade conflict.

However, in the Fed's Beige book released on Wednesday, manufacturers in every one of the central bank's 12 districts expressed concern about the impact of tariffs, even as the U.S. economy continued to expand at a moderate to modest pace.

"Trade war fears are something that won't go away overnight. Investors need to be prepared for various possibilities, such as the United States versus China and the United States versus European Union," said Libra's Sakuma.

Benchmark U.S. 10-year notes fell in price to yield 2.875 percent, from 2.862 percent on Tuesday. The U.S. yield curve remained near its flattest in nearly 11 years.

Oil prices rose 1.0 percent overnight after U.S. government data indicated bullish demand for gasoline and distillates, which overshadowed a surprise build in U.S. crude inventories and U.S. crude oil production's hitting 11 million barrels per day for the first time.

U.S. crude last traded at $68.86 per barrel, up 0.15 percent on the day, and Brent was at $72.80, down 0.14 percent, in Asian trade.

Spot gold dropped 0.24 percent in Asian trade, after falling to a one-year intra-day low of $1221.50 per ounce on Wednesday.

Oil prices mixed as producers adding more oil while U.S. gasoline stocks drop

Oil prices mixed as producers adding more oil while U.S. gasoline stocks drop
TOKYO (Reuters) - Oil prices were mixed on Thursday as the market struggled to digest signs of strong gasoline demand in the United States, the world's biggest consumer of the fuel, with a statement from oil producers that they are putting more crude on the market.

TOKYO (Reuters) - Oil prices were mixed on Thursday as the market struggled to digest signs of strong gasoline demand in the United States, the world's biggest consumer of the fuel, with a statement from oil producers that they are putting more crude on the market.

Brent crude futures fell 11 cents, or 0.2 percent, to $72.79 a barrel at 0401 GMT. West Texas Intermediate (WTI) crude futures climbed 6 cents, or 0.1 percent, to $68.82.

Both benchmarks rose by 1 percent on Wednesday after inventory data from the U.S. Energy Information Administration reported on Wednesday U.S. gasoline stockpiles fell along with supplies of distillate fuels. Motor fuel demand also rose from the week before and was up from a year earlier.

However, the EIA also reported U.S. oil production reached a record 11 million barrels per day (bpd). The United States has added nearly 1 million bpd in production since November, thanks to rapid increases in shale drilling.

Also, a meeting of members of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producer monitoring their supply pact reported on Wednesday that compliance with the agreement has declined, meaning more oil is available to the market.

The bullish tone sparked by the gasoline data is unlikely to last, said Stephen Innes, head of trading APAC at brokerage OANDA.

"President Trump is doing everything in his power to lower gasoline prices," he said.

"With Russia quick to offer the President a supply olive branch and Saudi Arabia mainly in his back pocket when it comes to increasing their supply, its challenging to see (the) gasoline numbers turning the bearish market's tide," he said.

Gasoline inventories fell by 3.2 million barrels last week, while distillate stockpiles, which include diesel and heating oil, dropped by 371,000 barrels, the EIA said on Wednesday.

A Reuters poll taken before the data release had forecast that gasoline stocks would be unchanged and distillate stockpiles would show a build of around 900,000 barrels.

A sharp jump in crude oil inventories in the United States also added to the bearish tone in the market.

U.S. crude stocks rose by 5.8 million barrels last week, compared with a forecast of a decline of 3.6 million barrels.

Oil markets have fallen over the last week as Saudi Arabia and other members OPEC member and Russia have increased production and as some supply disruptions have eased.

OPEC and non-OPEC's compliance with oil output curbs has declined to around 120 percent in June from 147 percent in May, two sources familiar with the matter told Reuters on Wednesday.

China to improve macro-prudential, counter-cyclical measures for forex management: official

China to improve macro-prudential, counter-cyclical measures for forex management: official
FILE PHOTO: Euro, Hong Kong dollar, U.S. dollar, Japanese yen, British pound and Chinese 100-yuan banknotes are seen in a picture illustration

BEIJING (Reuters) - China will improve macro-prudential, counter-cyclical measures for foreign exchange management, a spokeswoman for the nation's foreign exchange regulator said on Thursday.

Wang Chunying, spokeswoman at the State Administration of Foreign Exchange (SAFE), said the regulator needs to assess the impact of trade frictions on China's cross-border capital flows but that China can cope with challenges as its reserves are ample.

Tongue-lashings from North Korea's Kim underscore shift in focus to economy

Tongue-lashings from North Korea's Kim underscore shift in focus to economy
FILE PHOTO: North Korea leader Kim Jong Un visits Sindo County, North Phyongan Province in this undated photo released by North Korea's Korean Central News Agency

By Hyonhee Shin and Jeongmin Kim

SEOUL (Reuters) - North Korean leader Kim Jong Un's strident rebukes of officials during recent trips to industrial sites were aimed at rallying support at home for his economic drive and convincing outsiders about his willingness to denuclearize.

After racing toward his goal of developing a nuclear-tipped missile capable of hitting the United States, Kim in April shifted his focus to the economy. In June, Kim held an unprecedented summit with President Donald Trump in Singapore, where he lauded the city-state's economic progress and "world-class" amenities.

This month, the young leader has toured industrial facilities and special economic zones near North Korea's border with China, often lambasting officials over delayed construction projects or lackluster modernization of production lines, according to state media.

Kim has openly slammed executives on previous economic field trips, unlike his reclusive father. The latest criticisms appear to attempt to spur economic development nationwide - and shift blame to bureaucrats where progress has lagged, experts say.

"Now that economic development is made a main party line, he needs to show results but could have realized things were not so beautiful on the ground," said Koh Yu-hwan, a professor at Dongguk University in Seoul.

"To the people inside, he's trying to say it's not the fault of himself or them but that of the party executives, while encouraging ordinary citizens to work hard."

With nuclear talks with Washington under way, Kim may also want to dispel suspicion about denuclearization by highlighting his zeal for economic development.

Kim made a broad commitment at the Singapore summit to "work toward denuclearization," but fell short of details on how or when he would dismantle the nuclear programs.

"While trying to win the people's heart, Kim would want to show that he's making an all-out effort on the economy and he really means it, and defuse suspicions about denuclearization," said Lee Woo-young, a professor at the University of North Korean Studies in Seoul.

"SPEECHLESS"

This week, Kim blasted "shameless" and "pathetic" executives at a power plant site in the northeastern Hamkyong Province, "speechless" after realizing that only 70 percent of construction was completed since it started 17 years ago, the official KCNA news agency reported.

Earlier this month, Kim berated managers of a textile mill in the border city of Siniiju for blaming the lack of raw materials and money despite their poor work at the planned upgrade of the factory, according to KCNA.

The rebukes appeared part of Kim's efforts to mimic his popular, affable late grandfather, Kim Il Sung, in creating a bond between the leader and the people, said Michael Madden, a North Korea leadership expert at Johns Hopkins University's 38 North website.

"That some senior officials are being lackadaisical in their officials duties, he made a point of saying they only come out for the official opening events and aren't being responsible in the daily work," Madden said.

"This is similar to speeches and remarks that were made by Kim Il Sung who did the same thing."

BORDER FOCUS

Kim's recent tour to the northeast was the first full-fledged provincial visit in more than a year and illustrated his changing priorities, said Hong Min, a fellow at the state-run Korea Institute for National Unification in Seoul.

Kim has made 11 appearances at economic events and three military inspections so far this year, mostly near the capital of Pyongyang, according to a Reuters analysis of data by South Korea's Unification Ministry. Between January and July last year, Kim took 30 military trips and made 15 economic outings.

Large scale trips to regional areas are usually planned three months in advance after careful deliberations on the location, and the pick of the border region suggests Kim's resolve to boost economic cooperation with China, Hong said.

"Where he goes first matters, especially after a pause, because it gives different messages depending on the region," Hong said.

Kim has traveled to China three times since May, and also sent a high-level delegation on a 10-day tour of major economic hubs in China.

Shin Beom-chul, a senior fellow at the Asan Institute for Policy Studies in Seoul, said Kim's goal may be to encourage Beijing to push back against U.N. sanctions that have squeezed North Korea's economy.

"Rather than eyeing China as an economic model, he will most likely seek to expand trade and find some breathing space, hoping that China would loosen its enforcement of sanctions."

Japan exports to U.S. fall, business mood sours amid fears of trade war

Japan exports to U.S. fall, business mood sours amid fears of trade war
FILE PHOTO: Employees of Daikin Industries Ltd take their lunch break at the company's Kusatsu factory in Shiga

By Tetsushi Kajimoto and Stanley White

TOKYO (Reuters) - Japan's exports to the United States fell for the first time in 17 months and Japanese business sentiment soured amid worries about U.S. President Donald Trump's protectionist trade policies.

Exports to the United States dipped 0.9 percent in June from the same period a year ago on waning shipments of cars and semiconductor manufacturing equipment, two of Japan's most important export products.

Thursday's trade data came on the heels of the Reuters Tankan, which showed business sentiment slipped in July, reflecting companies' fears about an intensifying trade dispute between the United States and China.

The batch of data highlighted concerns among Japanese policymakers who worry Trump may resort to tariffs or other protectionist measures to fix trade imbalances with Japan under his "America first" policy.

With American imports down 2.1 percent, Japan's trade surplus with the United States widened 0.5 percent year-on-year to 590.3 billion yen ($5.24 billion). That could make it a potential target for Trump's protectionist policies.

Japan's global exports rose 6.7 percent in June, while imports gained 2.5 percent.

"Overall exports remain healthy for now, but we are not sure how things are going to turn out on the trade policy front," said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley (NYSE:MS) Securities. "It' possible talk of tariffs and trade friction could reduce corporate investment."

The Reuters Tankan, which tracks the Bank of Japan's closely watched quarterly tankan survey, found manufacturers' sentiment index stood at 25 in July, down one point from June, and the service sector's mood fell to 34 from 35 in the prior month.

The index subtracts the percentage of companies that feel negative about the economy from those who are optimistic, so a positive number means more businesses are upbeat.

TRADE PROTECTIONISM

Concerns about protectionism were widely cited in the Reuters poll of 483 large- and mid-sized companies, of which 268 responded between July 2-13, particularly among exporters of cars, precision machinery and metal products.

The United States this month imposed 25 percent tariffs on $34 billion of Chinese goods to lower the U.S. trade deficit, and China quickly retaliated with an increase in tariffs on U.S. goods.

"Our clients are increasingly taking a wait-and-see stance on capital expenditure in the face of uncertainty over trade friction between the United States and China and the EU," a manager of a machinery maker wrote in the survey.

"Uncertainty is rising over capital spending plans at our client firms due to the expansion of protectionist policies and geopolitical risks," said another machinery maker.

The manufacturers' index is seen rising to 29 in October, while the service-sector index is expected to hold steady, after July's decline led by real estate/construction firms.

The BOJ's tankan showed earlier this month that big manufacturers' mood soured for a second straight quarter in the three months to June, hurt by rising input costs and as U.S. trade protectionism clouds the outlook for Japan's export-dependent economy.

Still, the mood among non-manufacturers improved slightly and big firms' solid capital spending plans offered some relief.

($1 = 112.7300 yen)

California man pleads guilty to terrorism charges

California man pleads guilty to terrorism charges
© Reuters. California man pleads guilty to terrorism charges

A California man pleaded guilty on Wednesday to opening social media accounts to provide support to Islamic State, according to court documents.

Amer Sinan Alhaggagi, 23, said he opened Twitter and Facebook (NASDAQ:FB) accounts for two people he believed to be Islamic State supporters. Some of the Twitter accounts were subsequently used by the group to distribute news, according to a copy of his plea statement seen by Reuters.

Alhaggagi pleaded guilty to a charge of attempting to provide material support to a foreign terrorist group and three unrelated charges connected with use of a stolen credit card to buy clothing.

The case showed the risks to U.S. citizens, no matter what their intent, of providing any service to individuals claiming to be Islamic State supporters, his lawyer said.

"Amer is not a violent guy, he's not an anti-American guy he's not a radicalized guy," said his lawyer August Gugelmann in a phone interview. "He is a kid who said a lot of dumb things on the internet, attracted the attention of the FBI, then opened these accounts."

By pleading guilty to the charges, Alhaggagi is seeking a more lenient sentence than the maximum 47 years imprisonment and fine of $250,000 per charge, Gugelmann said.

Federal prosecutors have said Alhaggagi, in chats with an undercover Federal Bureau of Investigation agent, spoke of carrying out attacks on the University of California, Berkeley and in San Francisco.

Alhaggagi came onto the radar of Islamic State and the FBI after he tried to troll users of the Telegram instant messaging service who had blocked him, according to his plea statement.

He took on the role of an Islamic State supporter in a Telegram chatroom and said the users who blocked him were Shiites. He hoped Sunni supporters of Islamic State in the chat would block these users due to their opposition to the Shia branch of Islam, according to his statement.

Alhaggagi, who is of Yemeni ancestry, made pro-Islamic State statements in the chatroom that attracted the notice of the FBI. It also led two Telegram users to ask him to open social media accounts for Islamic State. At least one of the users was an Islamic State member, according to the U.S. government.

"He was playing a role and then he was asked to do this (open the accounts) as a favor and he did it without thinking through what it actually meant," said Gugelmann.

A sentencing hearing is expected in November, Gugelmann said.

Mexico's leftist election winners to appeal campaign funding fine

Mexico's leftist election winners to appeal campaign funding fine
Mexico's president-elect Andres Manuel Lopez Obrador holds a news conference at the campaign headquarters in Mexico City

By Suman Naishadham

MEXICO CITY (Reuters) - Mexican President-elect Andres Manuel Lopez Obrador's political party said on Wednesday it would appeal a $10 million fine from the National Electoral Institute (INE) for breaking campaign finance rules.

INE voted 10-1 in favor of fining the National Regeneration Movement (MORENA) 197 million pesos, the largest penalty of the election season that concluded with a presidential landslide for leftist Lopez Obrador and a majority for his party in Congress.

The fine is over a trust created by MORENA last year, which the party said went to helping earthquake victims. But INE said that MORENA was opaque about the money that came in and out and that it broke the rules.

"This authority found profound irregularities," INE board member Ciro Murayama said. "INE told the political parties that it wasn't legal for them to give out money directly."

The fine is almost as much as the 207.5 million pesos that MORENA received in public financing for its campaign in the 2018 election season.

Horacio Duarte, MORENA's representative at the institute, said the party did not break the law and accused some INE board members of pushing a political agenda.

He said the party would take up the fine with Mexico's electoral tribunal to appeal the decision.

According to INE, MORENA did not report forming the trust, known as "For the Others" for which it raised 78.8 million pesos ($4 million) through checks, cash deposits, and bank transfers. It said it also could not track where money withdrawn went.

INE also fined the ruling Institutional Revolutionary Party (PRI) 36.5 million pesos for deducting money from workers' salaries in the state of Chihuahua that was later funneled into the party.

The National Action Party (PAN) was fined 3 million pesos for receiving funds during the 2018 presidential election from private companies, which is illegal in Mexico.

South Korea court orders compensation to victims of 2014 ferry sinking

South Korea court orders compensation to victims of 2014 ferry sinking
FILE PHOTO: Maritime police search for missing passengers near capsized South Korean ferry "Sewol" at the sea off Jindo

By Hyonhee Shin

SEOUL (Reuters) - A South Korean court ruled on Thursday that the government and the operator of the Sewol ferry, which sank in 2014 killing 304 people mostly school children, must compensate the victims' families.

The ferry was structurally unsound, overloaded and travelling too fast on a turn when it capsized off the southwest coast on April 16, 2014, South Korean investigators said, placing the nation in deep grief for months.

A group of 354 members of the bereaved families of 118 students filed a lawsuit in 2015 against the government and the ferry operator, Chonghaejin Marine.

The Seoul Central District Court ordered each family be provided 200 million won ($177,000) per victim, and additional compensation of between 5 million won and 80 million won per family member.

It was the first time the court acknowledged the state's liability for the disaster.

Chonghaejin Marine overloaded the Sewol and its crew abandoned the stricken ferry after instructing passengers to remain in their cabins, a court document said.

The Coast Guard also failed for its part to maintain control over the ship, the document said.

"The victims died while waiting for rescue within the ship, without knowing about the detailed situation," said Judge Lee Sang-hyun in the document.

"But after more than four years until now, the dispute is still ongoing over who is responsible for the sinking and compensation."

Evacuation of two pro-Assad Syrian villages complete: Ikhbariya TV

Evacuation of two pro-Assad Syrian villages complete: Ikhbariya TV
Islamist rebels from Hayat Tahrir al-Sham are seen near ambulances and buses outside the villages of al-Foua and Kefraya

BEIRUT (Reuters) - The evacuation of all civilians from two loyalist Syrian villages that were besieged by rebels in the northwest is complete, Syria's Ikhbariya television said on Thursday.

Ikhbariya said all buses had left al-Foua and Kefraya by Thursday morning, making the two Shi'ite villages "empty of civilians". More than 100 buses arrived on Wednesday to transport residents and fighters from the villages to nearby government-held territory in Aleppo province.
July 18, 2018

Dollar's advance puts squeeze on gold, commodities

Dollar's advance puts squeeze on gold, commodities
Dollar's advance puts squeeze on gold, commodities

By Wayne Cole

SYDNEY (Reuters) - Asian share markets were mostly firmer on Wednesday as a bullish outlook from the head of the U.S. central bank buoyed the dollar, lifted Tokyo shares to a one-month top and sent gold to a one-year trough.

Japan's Nikkei (N225) rose 0.43 percent as a weakening yen promised to fatten exporters' profits. Spreadbetters and futures (FFIc1) also pointed to opening gains for European bourses.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) added 0.1 percent and Australia (AXJO) 0.6 percent. Shanghai blue chips (CSI300) started firm only to flag as China's yuan lost ground to the advancing dollar.

Federal Reserve Chairman Jerome Powell stuck with an upbeat assessment on the U.S. economy while downplaying the impact of global trade risks on the outlook for rate rises.

"The outlook is consistent with two further quarter point rate increases this year, likely in September and December," said Barclays (LON:BARC) economist Michael Gaspen.

"The main risk is that individuals, business, and financial markets have underestimated the desire of Trump to re-orient trade flows and that further steps to implement tariffs will lead to a reduction in confidence, a slowdown in hiring, and a correction in equity markets," he added.

BofA Merrill Lynch's latest fund manager survey showed a trade war remained the biggest threat cited by no less than 60 percent of respondents.

For now, U.S. companies seem to be profiting mightily from tax cuts as the earnings season shifts into high gear. Analysts now see second-quarter S&P 500 earnings growth of 21.2 percent, up from 20.7 percent on July 1.

Of the 39 companies in the index that have reported so far, 84.6 percent have come in ahead of street expectations. The Dow (DJI) ended Tuesday up 0.22 percent, while the S&P 500 (SPX) gained 0.40 percent and the Nasdaq (IXIC) 0.63 percent.

"The S&P has finally broken to the upside through 2,800 out of the range that has confined it for most of this year, and this could now be the start of a grind higher in global equities over the next few weeks," wrote analysts at JPMorgan (NYSE:JPM) in a note.

Next stop is the all-time top of 2,872 from January.

POUND IN PERIL

Powell's support for more rate hikes sent two-year Treasury yields (US2YT=RR) to the highest in nearly a decade and lifted the dollar broadly.

Against a basket of currencies, the dollar was up at 95.210 (DXY), after jumping 0.46 percent overnight. It also climbed to its highest since January against the yen at 113.07 .

The euro slipped further to $1.1634 (EUR=), after weakening 0.4 percent on Tuesday.

The pound suffered another bout of Brexit blues after British Prime Minister Theresa May only just cleared the latest parliamentary hurdle to her leaving plans.

Wednesday's edition of the Times reported May threatened rebel lawmakers in her own party with a general election they defeated the bill.

Bank of England Governor Mark Carney warned a no-deal Brexit would have "big" economic consequences and force a review of plans to raise interest rates.

Sterling was last huddled at $1.3090 , after sliding 0.9 percent on Tuesday.

The rising U.S. dollar coupled with the prospect of higher U.S. interest rates spelt trouble for gold, which crashed through major chart support to hit a one-year low.

Spot gold was hovering at $1,224.92 per ounce, having cratered at $1,223.78. The steadily less-precious metal is down more than 5 percent for the year.

Oil prices also eased after an industry group reported an unexpected increase in U.S. crude inventories. Brent (LCOc1) fell 35 cents to $71.81 a barrel, while U.S. crude (CLc1) was quoted down 50 cents at $67.58 a barrel. [O/R]

Exclusive: Philippines' San Miguel to invest $1 billion for 10 new breweries

Exclusive: Philippines' San Miguel to invest $1 billion for 10 new breweries
© Reuters. Exclusive: Philippines' San Miguel to invest $1 billion for 10 new breweries

MANILA (Reuters) - Philippines conglomerate San Miguel Corp (PS:SMC) is planning to invest at least $1 billion (£764.18 million) in the next two years to build 10 breweries in and outside the country, senior company executives said on Wednesday.

Banking on strong consumer demand in one of Asia's fastest growing economies, the maker of San Miguel Pale Pilsen and Red Horse beer is setting up eight breweries around the country, San Miguel President Ramon Ang told Reuters in an interview.

San Miguel is also looking to open its first production facility in the United States and build a second plant in Vietnam, Ang said. The conglomerate is Philippines' biggest brewer and its brewery business is partly owned by Japan's Kirin Holdings Co Ltd (T:2503).

Each new brewery would have an annual capacity of 1-2 million hectoliters and would cost at least $100 million, San Miguel Chief Finance Officer Ferdinand Constantino said in the same interview.

The conglomerate has pursued an aggressive expansion since 2008 to bolster revenues, adding infrastructure, mining, petroleum and power assets to its core food and beverage businesses.

San Miguel is also on track to sell up to $3 billion worth of shares in its food unit in the fourth quarter despite recent market volatility, the executives said.

Oil prices drop amid surprise jump in U.S. stockpiles

Oil prices drop amid surprise jump in U.S. stockpiles
© Reuters. Oil tanker unloads crude oil at a crude oil terminal in Zhoushan

By Aaron Sheldrick

TOKYO (Reuters) - Oil prices dropped on Wednesday after an industry group reported that U.S. crude inventories rose last week, defying analyst expectations for a significant reduction.

Brent futures were down 31 cents, or 0.4 percent, at $71.85 a barrel by 0240 GMT. They rose 32 cents to $72.16 a barrel on Tuesday, after earlier touching a three-month low.

U.S. West Texas Intermediate crude was down 36 cents, or 0.5 percent, at $67.72. It settled up 2 cents at $68.08 a barrel the session before, coming off a nearly one-month low.

The benchmarks had steadied after big declines on Monday and last week as supply disruptions in Venezuela came to the fore and as analysts had been forecasting a decline of 3.6 million barrels in U.S. inventories for the week through July 13.

But the specter of oversupply quickly returned, with a rise of more than 600,000 barrels in U.S. crude stockpiles, reported by the American Petroleum Institute late on Tuesday. [API/S]

Official numbers from the U.S. Department of Energy's Energy Information Administration are due at 10:30 a.m. EDT on Wednesday.

On the demand-side, intensifying risks over trade tensions between the United States and China could drag on the global economic outlook, BMI Research said.

"Despite U.S.-China trade tensions, the economic outlook is broadly positive, but a number of headwinds are emerging, not least a stronger dollar, rising inflationary pressures and tightening liquidity," BMI said.

"Slowing trade growth will weigh on physical demand for oil, with the shipping, road and air freight sectors an important pillar of demand globally," BMI said.

One U.S. central banker added her voice late on Tuesday to those sounding caution on trade.

Kansas City Federal Reserve Bank President Esther George said that uncertainty over U.S. trade policy could slow the economy, even if the recently imposed tariffs in and of themselves are too small to have a big impact.

George called trade policy a "significant" downside risk to her outlook for economic growth, even as tax cuts and other fiscal policy is an upside risk.

Dollar benefits from Powell's optimism, hits six-month peak vs. yen

Dollar benefits from Powell's optimism, hits six-month peak vs. yen
Dollar benefits from Powell's optimism, hits six-month peak vs. yen

By Shinichi Saoshiro

TOKYO (Reuters) - The dollar rose across the board on Wednesday, climbing to a six-month high against the yen, after Federal Reserve Chairman Jerome Powell gave an upbeat outlook for the U.S. economy and reinforced views that the Fed was on track to steadily hike interest rates.

In closely watched congressional testimony on Tuesday, Powell said he saw the United States on course for years more of steady growth, while largely discounting the risks associated with a trade war.

The dollar was up 0.05 percent at 112.955 yen after going as high as 113.08, its strongest since January 9.

The euro dipped 0.05 percent to $1.1653 (EUR=) after losing 0.4 percent overnight.

An easing of risk aversion was reflected on Wall Street, which rose overnight and supported Asian stocks on Wednesday after Powell's optimistic analysis of the U.S. economy.

"The dollar stands to gain further, particularly against the yen, with risk aversion in the equity markets petering out," said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

"And while long-term Treasury yields are not rising prominently, this is a reflection of investor demand for U.S. assets that generates a degree of dollar-buying."

The 10-year Treasury yield (US10YT=RR) firmed this week but it has been on a steady decline from a seven-year high above 3 percent set in May.

The two-year Treasury yield (US2YT=RR), most sensitive to the market's views on changes in Fed policy, has risen to a decade-high.

As a result the U.S. yield curve was the flattest in 11 years and close to inverting, a phenomenon in which the two-year yield becomes higher than the longer-dated Treasury yield.

An inverted yield curve is sometimes seen as a sign of waning confidence towards the economy and a signal for a recession.

"The correlation between the yield curve and the dollar has been relatively unstable. Taking this into account, currencies are unlikely to show a strong reaction if the curve does invert," said Tohru Sasaki, head of market research at JPMorgan Chase (NYSE:JPM) Bank.

The pound was little changed at $1.3110 after slipping 1 percent the previous day.

On top of the dollar's broad strength, sterling has come also under pressure from disquiet over British politics.

The currency fell to a three-week low of $1.3068 overnight as investors expected more Brexit challenges after Theresa May's government only narrowly won a parliamentary vote on post-Brexit trade with the European Union.

The dollar index against a basket of six major currencies (DXY) edged up 0.1 percent to 95.038 after rising roughly 0.5 percent the previous day.

The Australian dollar was a shade lower at $0.7384 , extending the retreat from Tuesday when it lost 0.45 percent against a broadly stronger greenback.

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