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Asia shares pare losses as China economy rebounds – The Guardian

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By Wayne Cole

SYDNEY (Reuters) – Asian shares pared early losses on Monday as data confirmed China’s economy had bounced back last quarter as factory output jumped, helping partially offset recent disappointing news on U.S. consumer spending.

Chinese blue chips gained 0.8% after the economy was reported to have grown 6.5% in the fourth quarter, on a year earlier, topping forecasts of 6.1%.

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Industrial production for December also beat estimates, though retail sales missed the mark.

“Despite the latest dip in retail sales, we see plenty of upside to consumption as households run down the excess savings they accumulated last year,” said Julian Evans-Pritchard, senior China economist at Capital economics.

“Meanwhile, the tailwinds from last year’s stimulus should keep industry and construction strong for a while longer.”

MSCI’s broadest index of Asia-Pacific shares outside Japan trimmed losses and were off 0.3%, having hit a string of record peaks in recent weeks. Japan’s Nikkei slipped 0.8% and away from a 30-year high.

E-Mini futures for the S&P 500 dipped 0.2%, though Wall Street will be closed on Monday for a holiday. EUROSTOXX 50 futures eased 0.2% and FTSE futures 0.1%.

The pick-up in China was a marked contrast to the U.S. and Europe, where the spread of coronavirus has scarred consumer spending, underlined by dismal U.S. retail sales reported on Friday.

Also evident are doubts about how much of U.S. President-elect Joe Biden’s stimulus package will make it through Congress given Republican opposition, and the risk of more mob violence at his inauguration on Wednesday.

“The data bring into question the durability of the recent move higher in bond yields and the rise in inflation compensation,” said analysts at ANZ in a note.

“There’s a lot of good news around vaccines and stimulus priced into equities, but optimism is being challenged by the reality of the tough few months ahead,” they warned. “The risk across Europe is that lockdowns will be extended, and U.S. cases could lift sharply as the UK COVID variant spreads.”

That will put the focus on earnings guidance from corporate results this week, which include BofA, Morgan Stanley, Goldman Sachs and Netflix.

The poor U.S. data helped Treasuries pare some of their recent steep losses and 10-year yields were trading at 1.087%, down from last week’s top of 1.187%.

The more sober mood in turn boosted the safe-haven U.S. dollar, catching a bearish market deeply short. Speculators increased their net short dollar position to the largest since May 2011 in the week ended Jan. 12.

The dollar index duly firmed to 90.816, and away from its recent 2-1/2 year trough at 89.206.

The euro had retreated to $1.2074, from its January peak at $1.2349, while the dollar held steady on the yen at 103.78 and well above the recent low at 102.57.

The Canadian dollar eased to $1.2773 per dollar after Reuters reported Biden planned to revoke the permit for the Keystone XL oil pipeline.

Biden’s pick for Treasury Secretary, Janet Yellen, is expected to rule out seeking a weaker dollar when testifying on Capital Hill on Tuesday, the Wall Street Journal reported.

Gold prices were undermined by the bounce in the dollar leaving the metal at $1,828 an ounce, compared to its January top of $1,959.

Oil prices ran into profit-taking on worries the spread of increasingly tight lockdowns globally would hurt demand. [O/R]

Brent crude futures were off 52 cents at $54.58 a barrel, while U.S. crude eased 44 cents to $51.92.

(Editing by Shri Navaratnam and Gerry Doyle)

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Economy

China Wants Everyone to Trade In Their Old Cars, Fridges to Help Save Its Economy

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China’s world-beating electric vehicle industry, at the heart of growing trade tensions with the US and Europe, is set to receive a big boost from the government’s latest effort to accelerate growth.

That’s one takeaway from what Beijing has revealed about its plan for incentives that will encourage Chinese businesses and households to adopt cleaner technologies. It’s widely expected to be one of this year’s main stimulus programs, though question-marks remain — including how much the government will spend.

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German Business Outlook Hits One-Year High as Economy Heals

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German business sentiment improved to its highest level in a year — reinforcing recent signs that Europe’s largest economy is exiting two years of struggles.

An expectations gauge by the Ifo institute rose to 89.9. in April from a revised 87.7 the previous month. That exceeds the 88.9 median forecast in a Bloomberg survey. A measure of current conditions also advanced.

“Sentiment has improved at companies in Germany,” Ifo President Clemens Fuest said. “Companies were more satisfied with their current business. Their expectations also brightened. The economy is stabilizing, especially thanks to service providers.”

A stronger global economy and the prospect of looser monetary policy in the euro zone are helping drag Germany out of the malaise that set in following Russia’s attack on Ukraine. European Central Bank President Christine Lagarde said last week that the country may have “turned the corner,” while Chancellor Olaf Scholz has also expressed optimism, citing record employment and retreating inflation.

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There’s been a particular shift in the data in recent weeks, with the Bundesbank now estimating that output rose in the first quarter, having only a month ago foreseen a contraction that would have ushered in a first recession since the pandemic.

Even so, the start of the year “didn’t go great,” according to Fuest.

“What we’re seeing at the moment confirms the forecasts, which are saying that growth will be weak in Germany, but at least it won’t be negative,” he told Bloomberg Television. “So this is the stabilization we expected. It’s not a complete recovery. But at least it’s a start.”

Monthly purchasing managers’ surveys for April brought more cheer this week as Germany returned to expansion for the first time since June 2023. Weak spots remain, however — notably in industry, which is still mired in a slump that’s being offset by a surge in services activity.

“We see an improving worldwide economy,” Fuest said. “But this doesn’t seem to reach German manufacturing, which is puzzling in a way.”

Germany, which was the only Group of Seven economy to shrink last year and has been weighing on the wider region, helped private-sector output in the 20-nation euro area strengthen this month, S&P Global said.

–With assistance from Joel Rinneby, Kristian Siedenburg and Francine Lacqua.

(Updates with more comments from Fuest starting in sixth paragraph.)

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Parallel economy: How Russia is defying the West’s boycott

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When Moscow resident Zoya, 62, was planning a trip to Italy to visit her daughter last August, she saw the perfect opportunity to buy the Apple Watch she had long dreamed of owning.

Officially, Apple does not sell its products in Russia.

The California-based tech giant was one of the first companies to announce it would exit the country in response to Russian President Vladimir Putin’s full-scale invasion of Ukraine on February 24, 2022.

But the week before her trip, Zoya made a surprise discovery while browsing Yandex.Market, one of several Russian answers to Amazon, where she regularly shops.

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Not only was the Apple Watch available for sale on the website, it was cheaper than in Italy.

Zoya bought the watch without a moment’s delay.

The serial code on the watch that was delivered to her home confirmed that it was manufactured by Apple in 2022 and intended for sale in the United States.

“In the store, they explained to me that these are genuine Apple products entering Russia through parallel imports,” Zoya, who asked to be only referred to by her first name, told Al Jazeera.

“I thought it was much easier to buy online than searching for a store in an unfamiliar country.”

Nearly 1,400 companies, including many of the most internationally recognisable brands, have since February 2022 announced that they would cease or dial back their operations in Russia in protest of Moscow’s military aggression against Ukraine.

But two years after the invasion, many of these companies’ products are still widely sold in Russia, in many cases in violation of Western-led sanctions, a months-long investigation by Al Jazeera has found.

Aided by the Russian government’s legalisation of parallel imports, Russian businesses have established a network of alternative supply chains to import restricted goods through third countries.

The companies that make the products have been either unwilling or unable to clamp down on these unofficial distribution networks.

 

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