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Pandemic fears send stocks, oil, yields lower

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By Rodrigo Campos

NEW YORK (Reuters) -A gauge of stock prices across the world fell on Tuesday and oil prices also slipped as concern lingered over rising global COVID-19 cases and their effect on the global economic rebound.

The dollar index ticked up after touching its lowest level since March 3 and Treasury yields fell, though they still held above last week’s more than one-month lows.

India reported 1,761 deaths from COVID-19 overnight, its highest daily toll, while Canada and the United States extended a land-border closure for non-essential travelers.

On Wall Street, travel stocks weighed on sentiment, with airline and cruise operators falling sharply.

Some of the recent optimism about the leisure industry has waned as the reopening might take a bit longer than initially thought, said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

“We’re not out of the woods yet when it comes to the COVID virus and getting to where global economies are reopening,” he said. “Some of that enthusiasm has diminished.”

The Dow Jones Industrial Average fell 256.33 points, or 0.75%, to 33,821.3, the S&P 500 lost 28.32 points, or 0.68%, at 4,134.94 and the Nasdaq Composite dropped 128.50 points, or 0.92%, to 13,786.27.

The pan-European STOXX 600 index lost 1.90% and MSCI’s gauge of stocks across the globe shed 0.85%.

Emerging market stocks lost 0.07%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.08% lower, while Japan’s Nikkei lost 1.97%.

After touching its lowest level in nearly seven weeks overnight, the dollar index rose slightly.

The currencies and interest rate markets could be relatively calm for another few weeks as the Federal Reserve and the European Central Bank each take their time adjusting their rate policies, said Mazen Issa, senior currency strategist at TD Securities.

“There really isn’t a strong catalyst in either direction this month to really break us out of ranges,” Issa said.

The dollar index rose 0.166%, with the euro unchanged at $1.2033.

The Japanese yen strengthened 0.08% versus the greenback at 108.09 per dollar, while sterling was last trading at $1.3939, down 0.31% on the day.

Tufts University economist Brian Bethune said the lower yields stood in contrast with their level close to 1.8% on March 30, reflecting worries that public health gains against the virus have stalled in Brazil, Canada and other countries.

“There’s a repricing of what the international environment is going to look like,” even though the U.S. economic recovery looks strong, Bethune said.

Benchmark 10-year Treasury notes last rose 11/32 in price to yield 1.5624%, from 1.599% late on Monday.

Concern over rising COVID-19 cases in India continued to weigh on the oil market.

“Given India’s position as a major crude oil importer … new restrictions would be very bad for the energy complex,” said Bob Yawger, director of energy futures at Mizuho.

U.S. crude recently fell 1.21% to $62.44 per barrel and Brent was at $66.50, down 0.82% on the day.

Spot gold added 0.5% to $1,778.80 an ounce. Silver gained 0.07% to $25.83.

Bitcoin last rose 2.4% to $57,030.36.

(Reporting by Rodrigo Campos; additional reporting by Laura Sanicola and David Henry in New York, Ross Kerber in Boston and Shivani Kumaresan and Medha Singh in Bengaluru; Editing by Dan Grebler and Richard Chang)

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A Key Indicator Shows Weakness In China’s Economy – Forbes

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You’d think from the official statistics that China’s economy was on fire. But a key metric indicates there could be trouble ahead for the second largest economy.

On the one hand the Chinese economy is said to have grown at almost 8% in the quarter through July, according to government data. That’s pretty impressive growth even for an emerging market economy like China.

Soft Steel in China

But on the other hand, more recent data shows a troubling weakness in the country’s steel production. It fell 13.2% in August versus the same month a year ago, according to data from the World Steel Association. That really matters because China produces more than half the world’s steel — or almost a billion metric tons in 2019 — much of which is used in the country’s manufacturing and construction industries. In other words, a weakness in steel production is tantamount to an indication of softness in China’s manufacturing and construction base.

Worse, still China is the only country int he top 10 steel producers to see a decline in steel output over the same period. Japan, the U.S. and Brazil all saw double digit increases, according to the World Steel Assn. data.

Deja Vu All Over Again?

I wrote about a more dramatic Chinese steel production slowdown in June 2015, arguing at the time that it likely augured bad economic news for the communist country. Sure enough in August 2015 poor economic news emerged from China sending global markets crashing.

For that reason, investors might want to be cautious about holding stocks with exposure to China such as those in the iShares MSCI China ETF

MCHI
. It’s already down 7% over the year through Friday, according to data from Yahoo.

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Quebec mulling additional support measures for economy: Pierre Fitzgibbon – Montreal Gazette

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The economy minister was in Montreal to introduce projects to brighten up downtown and lure office workers back.

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Quebec will consider unlocking fresh sums to support economic expansion and ensure businesses in downtown cores can survive the pandemic, Economy Minister Pierre Fitzgibbon said.

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Finance minister Eric Girard “is going to do an economic update in November, and we’re working now to see what other programs across all ministries we could tap to continue the relaunch of the economy,” Fitzgibbon said Friday in an interview in Montreal on the sidelines of a business event.

“Perhaps there are other sums out there that we can obtain. The government is quite open to this because all in all, public finances are in a good situation.”

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Quebec on Friday reported a $359-million deficit for the three-month period ended June 30. That’s a 92-per-cent improvement over the $4.74-billion shortfall reported in the same quarter a year ago — right at the start of the pandemic.

Real gross domestic product in Quebec expanded at an annualized rate of 3.4 per cent in the second quarter, topping its pre-pandemic level with the help of strong domestic demand, the provincial statistics institute said Thursday. Investment in machinery and equipment, household consumption and residential construction all posted gains.

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By contrast, GDP for Canada as a whole contracted 1.1 per cent on an annualized basis.

Despite the broad economic rebound, some sectors — such as commercial real estate — are struggling.

Office vacancies in downtown Montreal rose to 13.2 per cent in the third quarter, real-estate firm CBRE said Thursday. That’s the highest level since the fourth quarter of 2004.

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Fitzgibbon was in town Friday at a Chamber of Commerce of Metropolitan Montreal event to introduce eight creative projects selected to brighten up downtown Montreal and lure office workers back.

Provincial financing for the initiative totals $3.1 million, part of a $23.5-million aid package for Montreal’s central business district that was announced in March. All told, Quebec set aside $75 million to help rekindle economic activity in downtown cores across Quebec.

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“The Montreal economy accounts for 57 per cent of Quebec’s GDP, and we cannot let it down,” Fitzgibbon said. “If more money is required, we will do it. At this time, I don’t think we’ll have an issue with money. There are other programs for innovation or creativity that we can put to work. We can take money elsewhere to achieve the same thing.”

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COVID-19 has deprived downtown Montreal of much of its office worker population in the past 18 months. Plans to bring back employees this autumn have recently been put on hold as a fourth wave sweeps across Quebec.

In fact, teleworking’s enduring popularity probably means downtown cores will never be as busy as they were before the pandemic, according to Fitzgibbon.

“We have to admit that many companies are going to favour teleworking, even after health restrictions have been lifted, for reasons such as family-work balance,” the minister said. “That will be a reality.”

And with several downtown-based employers having opened satellite offices in suburbs such as Brossard or Laval during the pandemic, “perhaps we will never have the same density that we had before,” he said.

ftomesco@postmedia.com

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Bahrain to Double VAT as Economy Recovers from Pandemic – BNN

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(Bloomberg) — Bahrain will double value-added tax to 10% in an effort to boost revenues and curb one of the Gulf’s widest budget deficits as the economy begins to recover from the pandemic, according to an official close to the government. 

The Gulf country decided to raise VAT following a comprehensive spending and revenue review, the official told Bloomberg, as the government looks for ways to rebalance its finances without undermining an economy in recovery mode.

Bahrain is under fiscal strain despite a $10 billion bailout package pledged by its wealthier neighbors in 2018. Last year, it said it was putting some of its reform efforts on hold to focus on helping the economy cope with the double shock of Covid-19 and a fall in oil prices. 

Bahrain Puts Economic Recovery Ahead of Boosting Budget Revenue

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