China and US economies diverge over coronavirus response

WASHINGTON - The United States and China dealt with the spread of the devastating coronavirus pandemic in vastly different ways, and that split is reshaping the global battle between the world's two leading economies.

About 11 months after the Wuhan outbreak, China's official GDP numbers this week show not only that the economy is growing, up 4.9% for the third quarter from a year earlier, but also that the Chinese are confident enough the virus has been vanquished to go shopping, dine and spend with gusto.

China's total reported death toll is below 5,000 and new infections are negligible, the result of draconian lockdowns, millions of tests, and strict contact tracing that set the stage for an economic rebound.

"China's success in containing the virus has allowed its economy to rebound more quickly, and with relatively less policy support, as compared with other large economies," said former senior US Treasury official Stephanie Segal, a senior fellow at the US-based Center for Strategic and International Studies.

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In the United States, 221,000 people are dead from COVID-19 after a delayed federal response, partisan battles over mask-wearing and lockdowns, and plenty of public events that do not follow public health guidelines. The country is in the midst of a new wave of infections.

Entertainment venues, restaurants and tourist spots are closed or only partially open, millions of people are out of work indefinitely , GDP is expected to shrink this quarter and the United States faces a gap in economic output that could last years.

"Obviously the US government bungled it," said Harry Broadman, a former senior US trade official and managing director with Berkeley Research Group. The singular authority of China's Communist Party helped Beijing enforce contact tracing and lockdowns, Broadman said. Other democracies, including New Zealand and South Korea, stamped out the virus as China did.

The real difference between the United States and China is Washington "has been arguing over stimulus issues on Capitol Hill and it's still far too little and too late," said Broadman, who has served under both Republican and Democratic presidents. "That has created more and more uncertainty on the part of business."

Ahead of a Nov. 3 re-election bid, US President Donald Trump has blamed China for the spread of the virus and asserted his administration had done all it could to contain it. Asked during a town hall due to be broadcast on Sinclair Broadcast Group on Wednesday if he would have done anything differently, Trump said, "No, not much."

White House spokesman Brian Morgenstern said on Wednesday that China does not accurately report anything, "let alone data regarding coronavirus infections and economic growth." He said Trump was rebuilding a strong and inclusive economy with the expected arrival of new treatments and vaccines in what the spokesman called record time.

The US Federal Reserve on Wednesday released data that showed a slight to modest recovery in the US economy, although the picture varied greatly from sector to sector.

RIPPLE EFFECTS

Experts cite longer-term concerns about China's economic prospects, including the high debt levels of its state-owned companies.

"Reliance on investment-led growth, fueled by credit expansion, builds up even further leverage and risks in an already weak financial system, and will further pull down efficiency and the sustainable growth rate," said Mark Sobel, a former senior US Treasury official.

But for now, the divergent responses to the virus will have an impact on the fierce political and economic rivalry between Beijing and Washington with ripples felt around the world, experts said.

"China's economy in 2021 is going to be 10% bigger than it was in 2019, and every other major economy is going to be smaller," said Nicholas Lardy, an economist with the Peterson Institute for International Economics.

That means China's "role in the global economy is going to continue to expand," Lardy predicts, making any attempts by US policymakers to discourage other countries from deals with Beijing, or otherwise "decouple" China from the global economy, more difficult.

China's exports have been stronger than expected, bolstered by demand for medical goods overseas. While the IMF projects global trade volume will fall by 10.4% in 2020, China's overall share of global trade has grown.

Beijing is experiencing other benefits as well. "We see signs of China's success in the exchange rate and equity market performance at a time when many other economies are under pressure," Segal said.

China's fiscal deficit for 2020 will expand by 5.6 percentage points to 11.9% of GDP - a smaller-scale increase than the massive stimulus that Beijing deployed during the 2008-2009 financial crisis, the IMF's Fiscal Monitor shows.

By contrast, the United States will see a 12-percentage point increase in its 2020 fiscal deficit as a share of GDP, to nearly 19%.

While China's consumption is improving, retail sales are still down 7.2% over the first three quarters, with urban residents' disposable incomes down 0.3% over the same period. Strict lockdowns earlier in the year led to months of lost wages for many workers.

In Beijing, officials are highlighting their leadership role.

"China's epidemic control and prevention is at the forefront of the world, and China's companies are supporting the global resumption of work and production through their own resumptions," said Liu Aihua, spokeswoman for the National Bureau of Statistics, at a news conference where she announced the third quarter GDP results.

Meanwhile, the United States still lacks a robust contact tracing system, or enough testing, Lardy said. These are things the US could have "done much better at without being an authoritarian single party state," he added.

-reuters-

Asian stock markets hold breath for China data, Brexit news

SYDNEY -- Asian markets were in limbo early on Monday ahead of data likely to show the Chinese economy slowed at the end of last year, underlining the urgent need for more stimulus as Beijing wrestles with the United States over trade.

Investors are also waiting to hear British Prime Minister Theresa May's 'Plan B' for Brexit which is due to be presented to parliament later on Monday.

MSCI's broadest index of Asia-Pacific shares outside Japan was little changed in early trade, after rising 1.6 percent last week.

E-Mini future for the S&P 500 were 0.1 percent lower, though trade was light with the US on holiday. Japan's Nikkei added 0.7 percent, helped by a recent pullback in the yen.

China is expected to report that economic growth cooled to its slowest in 28 years in 2018 in the face of weakening domestic demand and bruising US tariffs.

Analysts polled by Reuters expect the world's second-largest economy to have grown 6.4 percent in the fourth quarter from a year earlier, matching levels last seen in early 2009 during the global financial crisis.

That could pull 2018 gross domestic product (GDP) growth to 6.6 percent, the lowest since 1990 and down from a revised 6.8 percent in 2017.

Chinese stocks had rallied on Friday on reports US Treasury Secretary Steven Mnuchin discussed lifting some or all tariffs imposed on Chinese imports, a story later denied.

US President Donald Trump said on Saturday there has been progress toward a trade deal with China, but denied that he was considering lifting tariffs.

"Things are going very well with China and with trade," he told reporters at the White House. Chinese Vice Premier Liu He will visit the United States on Jan. 30 and 31 for the next round of talks with Washington.

MORE BREXIT

Over in Britain, May will return to parliament on Monday to set out how she plans to try to break the Brexit deadlock after her deal was rejected by lawmakers last week.

May told ministers on Sunday she was looking for ways to make the so-called Northern Irish backstop more acceptable to her Conservative Party and Northern Irish allies.

"We expect only incremental changes from "Plan A" given cross-party talks have fallen flat," analysts at TD Securities wrote in a note.

"Amendments are likely to be introduced all week, with MPs pushing to cancel 'No-Deal', introduce a second referendum, and perhaps push for a permanent customs union," they added. "May will likely travel to Brussels to seek concessions from the EU."

The uncertainty kept sterling sidelined at $1.2860, having briefly been as high as $1.3000 last week.

The dollar held firm on the yen at 109.63, while the euro was near the floor of its recent trading range at $1.1365 . Against a basket of currencies, the dollar was a shade firmer at 96.362.

In commodity markets, spot gold was steady at $1,282.80 per ounce.

Oil prices eased Monday after jumping about 3 percent on Friday as OPEC detailed specifics on its production-cut activity to ease global oversupply.

Brent crude dipped 35 cents to $62.35 a barrel. US crude futures fell 31 cents to $53.49 a barrel.

source: news.abs-cbn.com

China forex regulator tightens controls to stem outflows: sources

SHANGHAI/HONG KONG - China is stepping up measures to stem capital outflows after the yuan currency skidded to more than eight-year lows, taking aim at outbound investment, sources said on Tuesday.

The State Administration of Foreign Exchange (SAFE) has begun vetting transfers abroad worth $5 million or more and is stepping up scrutiny of major outbound deals, including those with prior approval, sources with knowledge of the new rules said.

Capital outflows through both legal and illegal channels have added pressure to the yuan's slide. The Chinese currency has lost nearly 6 percent of its value against the dollar so far this year.

Sources said the forex regulator told banks about the new rules on Monday, the same day the government said it would stick to its "going out" strategy of encouraging outbound investment.

SAFE did not respond to a Reuters request for comment.

"Previously, only forex transfers worth $50 million or more needed to be reported to SAFE. Now, the threshold has been drastically lowered to $5 million, and covers both foreign currency and yuan," said one of the sources with direct knowledge of the rules.

"All we can do is to ask clients to be patient, and tell them that the transaction is being vetted by SAFE for authenticity and may not be approved."

The fresh restriction applies to transfers abroad under the capital account, for transactions such as portfolio or foreign direct investment.

The source said that even if an outbound investment had already obtained approval to buy foreign exchange, but the money had not been fully transferred, the remainder of the quota was now subject to further approval if it exceeds $50 million, which is regarded as a "large sum".

Two other sources confirmed the new rules.

Chinese state-owned banks were seen selling dollars in the onshore foreign exchange market for a second straight day on Tuesday, in what traders said appeared to be a bid to support the yuan.

The yuan has rebounded around 0.5 percent in the past few sessions.

source: news.abs-cbn.com

China Q3 growth seen steadying but property, debt key risks

BEIJING - Fueled by government spending and a housing frenzy, China's economic growth likely steadied at 6.7 percent in the third quarter, but slumping private investment, surging debt and the risk of a property correction are keeping the government and global investors on edge.

Wednesday's data is expected to paint a picture of an economy that is slowly stabilizing but increasingly dependent on government spending and a housing boom for growth, as exports remain stubbornly weak.

Chinese leaders are trying to spur growth to create jobs, but are also facing pressure to push painful structural reforms such as cutting industrial overcapacity, raising the specter of more layoffs and debt defaults.

Government pledges to reduce debt are also fraught with risk, as less leverage almost always means slower economic activity in the short run, a prospect Beijing will be loath to accept as it spends ever more to hit official growth targets.

Economists believe that the greatest near-term risk is a possible correction in the high-flying property market, which accounts for about 15 percent of gross domestic product (GDP). A wave of restrictions imposed on buyers in major cities in recent weeks has resulted in a sharp drop in sales.

"Downward pressure on growth could mount after recently announced property tightening measures. Short-term growth would also likely come under pressure as a reduction in credit growth spurs a fall in spending," analysts at Singapore's DBS Group said in a note.

"Of course, such a deleveraging push could put China's economy on a more sustainable long-term path by reducing the risk of a bad-debt crisis."

Premier Li Keqiang said last week that the economy performed better than expected in the third quarter due to a rebound in factory output, company profits and investment, while adding that debt risks are under control.

However, the forecast for the third-quarter by 58 economists polled by Reuters would still be near the weakest since the global crisis, despite an expected mild improvement in factory output and investment in September.

Analysts at DBS have penciled in growth of 6.5 percent - the poorest showing since the first quarter of 2009, when it slowed to 6.2 percent amid the global crisis.

The government is aiming for growth of between 6.5 percent and 7 percent this year. In 2015, the economy expanded 6.9 percent, its slowest rate in 25 years.

Despite a rocky start, the economy grew 6.7 percent in the first half as the government cranked up infrastructure spending and state banks extended a record amount of credit.

A surprisingly strong third-quarter reading would be a welcome boost for the gloomy global economy as well as financial and commodities markets.

But unexpectedly robust data could fan skepticism about the reliability of Chinese official data. Some market watchers believe current growth is much weaker than government readings suggest.

A weak outcome would raise the risk of more capital outflows and put more pressure on the yuan currency, which has slid to six-year lows. It could also reduce Beijing's appetite for tough reforms.

But analysts believe the central bank may not rush to ease policy, given the government is now leaning more on fiscal spending to generate growth.

source: www.abs-cbnnews.com

Ayala signs $2-M deal to manufacture motorcycles

MANILA - While the rest of the world is fretting over a slowing Chinese economy and weakening global demand, the Ayala Corporation is seeing only opportunity.

The Ayala group has signed a $2 million joint venture deal with Austrian motorcycle company KTM to build motorcycles in the Philippines, primarily for export to China.

Ayala will control 65 percent of the joint venture, and it will manufacture the bikes in the Integrated Micro Electronics Inc. (IMI) plant in Laguna.

The joint venture aims to start production by January 2017. It wants to set up a showroom and start sales by the last quarter of this year.

While the joint venture is targeting China's market of 60 million motorbikes sold per year, Ayala Corp. chairman Jaime Augusto Zobel de Ayala said the real objective is to take advantage of a shift in how manufacturing is being done.

"There will always be demand for motor vehicles, but what we are seeing right now is a tech shift in how motor vehicles are manufactured. Not all manufacturing sectors are equipped to produce the electronic systems of the new designs being rolled out. IMI has that capacity, and through IMI and this venture, we will be able to fill the demand for more connected and tech- centered vehicles," he said.

Zobel de Ayala said IMI is already a major player in automotive electronics, and he said this venture will be the first time the Ayala group will use that expertise to build a whole vehicle.

The first two production lines in Laguna will be dedicated to smaller motorcyles, 200cc and 390 cc.

The Laguna plant will be the third production facility of KTM in the world. The first facility is located in Austria while the second is in India. The Philippine operation will cater to ASEAN and China.

The launch comes after the release of new economic data from China, showing the largest economy in this part of the world growing at its slowest pace since 2009.

Arthur Tan, president of IMI, said their operations in China have felt the effects of the slowdown, but he is not at all dismayed by it.

"This is part of a transition that is a good thing, the Chinese government is cleaning up the system, ensuring an equal playing field, improving its banking systems. IMI is benefiting because competition is shying away from the challenge of adapting, we are meeting it and garnering more business," he said.

Aside from building the bikes, IMI will also be taking part in the design stage of the motorcycles, specifically electronics systems that would enhance safety and maneuverability.

The first of the Philippine-designed KTM bikes should be rolled out in four years.

source: www.abs-cbnnews.com

Expert reveals biggest concerns of world's top CEOs

Marios Maratheftis, the Global Chief Economist of Standard Chartered Bank, is the person sought by top-level CEOs for advice on big industrial leaps.

Nowadays, he says, three of the biggest concerns for them are the Fed’s interest rate hikes, the deceleration of the Chinese economy, and the big drop of oil prices.

The 25 basis points that the U.S. Federal Reserve has hiked may seem a small movement, but Maratheftis notes that after nine and a half years of cutting rates, the first hike in December 2015 indicates that there's more to come.

“It signals a change in the regime and in the world order. And it has been significant. We’ve seen a lot of currencies, especially in emerging markets, moving quite rapidly in anticipation of a hike,” he tells Cathy Yang on The Boss.

He also says the U.S. economy will probably slow down this year and could see a shallow, short-term recession in 2017.

He predicts, however, that after one more hike this month, the Fed’s next move will be a cut. While this decline is always a bad thing, the interest cuts mean more capital flow into emerging markets.

The second biggest economy in the world has also seen a slowdown the previous year. The Chinese economy, however, is slowing down by design, with their policy-makers opting to shift their economic model from manufacturing and construction to a more sustainable model of services and construction.

Maratheftis says it is inevitable that there will be a slowdown, but the market’s reaction to it is much ado about nothing.

“The Chinese have the tools to maintain growth of up to 7%. They can cut interest rates, they can cut their reserve requirement ratio if they want to, and they can use fiscal policy and spend more in their economy. They’ve implemented these measures already.”

Problems in the petroleum industry, Maratheftis maintains, is rooted on the huge drop in prices over very little surplus in oil. With only a million barrels in excess per day, the supply can deplete quickly.

Standard Chartered estimates the price of oil to rise from $30 per barrel to $60-$70 per barrel should this continue. He adds that “the question isn’t the demand, because people are still buying; but are there going to be enough sellers or suppliers to satisfy that demand? Our answer is no.”

Considering all of the aforementioned, his recommendation to the captains of industry for years 2016 and 2017 is to "retreat, regroup, rebound."

Although financial markets are in the retreat phase, the fundamentals indicate, according to Maratheftis, that the current situation is not as bad as the markets have expected.

source: www.abs-cbnnews.com

ANALYSIS: Impact of China's manufacturing contraction

MANILA - China manufacturing contracted for a sixth straight month to start 2016, with January producing the weakest reading for the Caixin Manufacturing Purchasing Manager's Index since August 2012.

Services, meanwhile, stayed in expansion mode, but eased from the 16-month high hit in December.

The National Bureau of Statistics of China just reported industrial profits contracted by between 2 and 4 percent, depending on the sector, with mining profits falling 58 percent year on year.

All of these point to weakness in the region's largest economy, which in turn points to more volatility in financial markets.

April Lee Tan, head of research at COL Financial, said this is part of an economic transition in China, a shift from relying on industrial output and exports, to a more "stable and defensive" growth driven by domestic consumer spending.

Tan said the shift is necessary if China wants to become more like the no. 1 economy, the US.

The view is shared by HSBC. In its Investment Strategy Report for 2016, HSBC said "China's slowdown contributed to damp global trade via a slowdown in manufacturing, but the country's services sector continues to improve in a dynamic that is typical of an economy moving towards 'developed status.'"

Therefore, the situation is promising because China's economy is behaving the way its policy makers wants it to. It is now just a matter of services, and consumer demand, growing strong enough to replace industry as the driver of China's economic engine. When that will happen is anyone's guess right now.

Obviously, China's transition will affect how the global economy works. Tan said commodities will be impacted greatly, with China being the largest consumer of industrial metals and oil.

Tan said once China truly transitions into a consumer-driven economy, miners will no longer enjoy "demand for precious metals, industrial metals" because the largest market in the region will be demanding consumer products instead.

Weakness in China, or weak demand for oil there, is already one of the themes behind multi-year lows in world oil prices, the other being the supply glut forced onto the market by the organization of petroleum exporting countries.

Industrial metals have also been falling since last year, and some of the clear losers in that respect have been Filipino nickel miners, including Nickel Asia, which has seen its stock price plunge.

Benjamin Pedley, regional head of investment strategy for HSBC Asia, said the foreign exchange market will likely remain volatile until there is some stability in China, as well as energy markets.

Pedley said, "If and when we get stability coming back from Chinese economic growth data, stability in energy markets, then that might be the situation where we see emerging market currencies stabilizing against the US dollar, but at this stage, we are not at that point."

However, Pedley said equities, specifically in China, the Philippines and Indonesia, only face limited downsides, because stocks there have already fallen so much, making share prices very attractive.

In China alone, shares in Shanghai and Shenzhen lost about $2 trillion in market value just last month. HSBC said this means so many quality companies are trading at affordable prices, and this is why it is overweight in China, the Philippines and Indonesia.

On top of that, Pedley is also confident the People's Bank of China (PBOC) will not sit by and watch the Chinese economic slowdown get out of hand.

Pedley rears to the "policy put" which simply means no matter how bad things get, policy makers can react to get the situation back under control. The PBOC has already intervened several times in January to limit volatility in China's stock and currency markets.

In Japan, the Bank of Japan just surprised the world with negative interest rates to further its efforts in boosting Asia's second largest economy. Pedley said whatever the situation, policy makers can and will intervene to smooth out the ripples.

That said, investors still need to tread carefully, because timing the end of all of this market volatility is still hard. HSBC's Herald van Der Linde said, "If I look at it at a 12-month basis, medium term, do I think money will flow back into Asia, yes I do think money will start to flow back. we will need to see a few things, better Chinese numbers, and maybe for example commodity prices need to stabilize."

So, at the very least, a turnaround should happen for markets like the Philippines within 2016.

source: www.abs-cbnnews.com

Asian shares in for worst week in 4 years on panic over China

TOKYO - Asian shares are on course to post their biggest weekly fall in more than four years as investors dumped risk assets on fears over China's economy and its turbulent financial markets.

China announced late on Thursday it suspended its new stock market circuit breaker introduced only on Monday as the system failed to reduce market volatility, with some market players even saying it backfired.

The People's Bank of China (PBOC) also wrong-footed traders by reportedly intervening heavily to defend the yuan in offshore trade, reversing a decline of more than 1 percent that took it to a record low of 6.7600 per dollar.

The action was somewhat ironic since it was the PBOC that triggered the slide early Thursday by fixing the yuan at a much lower rate than many expected.

That left dealers at a loss to know what the central bank might do at Friday's fixing.

"The sharp drop has led to speculation that China is letting go of the reins on the CNY (yuan), or perhaps targeting faster depreciation to reach an 'equilibrium' level," wrote analysts at Barclays, while conceding that no one was really sure.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2 percent, extending this week's loss to 7.4 percent, which would be its biggest fall since September 2011.

Japan's Nikkei .N225, which is in its worst start of year in 20 years, fell 1 percent to a three-month low and is likely to post its biggest weekly fall since March 2011.

"There is lots of negative news from China, North Korea and indeed almost all of the emerging markets... After last year's good performance we were bound to see a pull-back. Companies will remain cautious in their outlook when they present Oct – Dec 2015 earnings," said Hannah Cunliffe, senior portfolio manager at Union Investment in Frankfurt.

"The Nikkei will trade below its 2015 high for most of this year," she said.

The picture is similarly gloomy on Wall Street, with the S&P 500 losing 2.4 percent on Thursday, with 40 percent of the stocks in the benchmark trading 20 percent or more off of their highs, the definition of a bear market.

After the U.S. market close, two Apple suppliers added to growing worries about slowing shipments of iPhone 6S and 6S Plus by cutting their revenue estimates for the third quarter.

That news put fresh pressure on many Apple suppliers in Asia, although the immediate focus is on the Chinese yuan and Chinese shares.

In commodities Brent crude LCOc1 settled down 48 cents at $33.75 on Thursday, after sliding to a low of $32.16, a level last seen in April 2004.

A plunge in oil revenues is seen hurting many oil producing countries such as Saudi Arabia.

In a sign of Riyadh's dire fiscal position, Saudi Arabian deputy crown prince Mohammed bin Salman told The Economist magazine it is considering whether to sell shares in state oil giant Saudi Aramco.

With risk appetite severely hurt, investors are flocking to low-risk assets such as bonds, gold and traditional safe-haven currencies.

The 10-year U.S. Treasuries yield fell to a 2 1/2-month low of 2.119 percent on Thursday and last stood at 2.156 percent.

Gold rose to a two-month high of $1,113.2 XAU=, a gain of 4.9 percent so far this year.

The yen stood near Thursday's 4 1/2-month high of 117.33 yen, last trading at 117.64 yen. The euro was little changed at $1.0917.

The Australian dollar, often used as a liquid proxy for China trade, licked wounds at $0.7016, having fallen to a three-month low of $0.6981, which represented a 4.2 percent fall from the end of last year.

source: www.abs-cbnnews.com

Stocks shrug off China data, Fed weighs on markets

LONDON - Stocks rose on Monday, shrugging off tepid Chinese economic data while the dollar weakened before a US Federal Reserve decision on whether to raise interest rates for the first time since 2006 later this week.

Oil prices fell again on falling demand which analysts said could take a further hit if interest rates rise in the world's biggest economy.

The combination of worries about slowing growth in China and higher U.S. borrowing costs have weighed on markets for weeks, becoming more acute as this week's Fed meeting has approached.

A Reuters poll on Friday showed a small majority of forecasters still expect a Fed hike on Thursday, though markets-based models suggest policy tightening will be delayed.

Growth in Chinese investment and factory output in August lagged forecasts and, after weak trade and inflation data last week, made it more likely that third-quarter economic growth may dip below 7 percent for the first time since the financial crisis. Only retail sales beat forecasts.

Shares fell in China and Japan, though MSCI's main index of Asia-Pacific stocks, excluding Japan .MIAPJ0000PUS, rose 0.5 percent and European shares followed them higher.

The pan-European FTSEurofirst 300 index .FTEU3 rose almost 1 percent with Britain's FTSE 100 index .FTSE up 1.2 percent.

China's Shanghai Composite index .SSEC dropped 2.8 percent and the CSI 300 .CSI300 index of the biggest listed companies in Shanghai and Shenzhen lost 2 percent. Tokyo's Nikkei .N225 closed down 1.6 percent.

The dollar dipped against the yen JPY=, falling 0.3 percent to 120.24 yen but and was steady against the euro EUR= at $1.1341.

"If there is an uncertain world, if China is slowing aggressively, then you have a situation where the Fed may well reconsider raising interest rates," said Bank of New York Mellon FX strategist Neil Mellor in London.

"What we're seeing is a general back-off from the view that the Fed is raising rates."

In emerging markets, Turkey's lira TRYTOM=D3 fell to a record low of 3.064 to the dollar

Oil prices fell nearly 1 percent on the prospect of dwindling demand, though reduced U.S. drilling, as measured by a rig count, offered some support.

Brent crude LCOc1, the global benchmark, was down 44 cents at $47.70 a barrel.

"Both the supply and demand pictures look less favorable over the coming months ... Outside the U.S., oil fundamentals appear to be slipping seasonally," Morgan Stanley said on Monday.

Broadly stronger stocks weighed on core government debt. German 10-year Bunds DE10YT=TWEB, the euro zone benchmark, rose 1 basis point to 0.66 percent while U.S. 10-year Treasuries US10YT=RR yielded 2.19 percent, up from 2.18 percent at Friday's New York close.

Copper turned lower in London on worries over China and the Fed. Three-month copper on the London Metal Exchange CMCU3 slipped by 1 percent to $5,316.50 a tonne.

Gold XAU= held steady at around $1,107 an ounce.

source: www.abs-cbnnews.com

Asian shares bounce off 3-year lows while China's suffering goes on

TOKYO - Volatile global markets showed signs of a respite from the recent blood-letting on Tuesday, as bargain hunters helped Asian stocks off three-year lows hit on fears that China's economy was risking a hard landing, with Chinese shares losing another 5 percent.

The MSCI's broadest index of Asia-Pacific shares outside Japan jumped 1.7 percent after an initial dip to three-year lows while Japan's Nikkei index also erased most of its early losses after an initial drop of 4.3 percent.

"There appears to be buyback as many markets look oversold after panicky selling in the last few days. Even the shares that had little business ties with China were sold," said Yukino Yamada, senior strategist at Daiwa Securities.

U.S. stock futures also gained 2.0 percent in Asia, paring a part of its 5-percent fall the previous day.

But mainland Chinese shares bucked the trend, with Shanghai Composite Index falling another five percent even after 15 percent fall in the last three days, including 8.5 percent drop on Monday.

"Global investors are cannibalizing each other. Calling it a market disaster is not an overstatement," said Zhou Lin, an analyst at Huatai Securities.

"The mood of panic is dominating the market ... And I don't see any signs of meaningful government intervention."

Underlining concerns about China, Japanese Finance Minister Taro Aso said on Tuesday he hoped China would take action to stabilize its economy and that Tokyo had no plan for now to unveil its own new economic stimulus package.

MSCI's all country world index is up 0.2 percent in Asia after having fallen 3.8 percent on Monday to a 10 1/2-month low, its biggest fall in almost four years.

Global share markets have been hit by worries that the Chinese economy, the most important engine for the world economy, was growing at a much slower pace than Beijing's 7 percent target for 2015.

Investors are also unnerved by uncertainty over U.S. monetary policy. The Federal Reserve has said it plans to raise interest rates this year for the first time in almost a decade.

The heavy fall in share prices worldwide over the past week has sharply reduced expectations of a U.S. rate hike in September, but the outlook is far from clear.

Atlanta Fed President Dennis Lockhart, whose comments earlier this month sparked expectations of a hike in September, said on Monday that the Federal Reserve will likely begin raising rates "sometime this year."

On Wall Street, the S&P 500 Index fell 3.9 percent to a 10-month low on Monday. The CBOE volatility index, a key measure of U.S. equity volatility, shot up to more than 50 percent at one point for the first time since the 2008 global financial crisis.

Because some investors often fund their investment in risk assets by borrowing low-yielding euro and yen, the sell-off in shares helped send both currencies to seven-month highs.

The euro rose as high as $1.1715 while the yen strengthened to 116.15 to the dollar.

But both currencies stepped back in Asia. The euro slipped 0.7 percent to $1.1531 while the yen retreated to 120.02 to the dollar.

Oil prices also stabilized in Asia after having plunged more than 6 percent on Monday to 6 1/2-year lows.

U.S. crude futures traded at $38.73 per barrel, gaining a dollar from Monday's low of $37.75.

Brent crude futures last stood at $43.20 after having fallen to $42.23 on Monday.

Brent still stood not far from $36.20, its low hit in the aftermath of the global financial crisis, having fallen more than 66 percent from last year's peak.

source: www.abs-cbnnews.com