TOKYO, Jan 31 (Reuters) – Japan’s factory output shrank for the first time in three months in December as a decline in machinery outweighed a small rise in car production, casting a cloud over the strength of the economic recovery.

Retail sales posted their third straight month of year-on-year gains in December as low coronavirus cases encouraged shoppers. Record infections this month driven by the Omicron variant, however, are expected to have hit consumer sentiment.

Factory production lost 1.0% in December from the previous month, pulled down by a decline in output of general-purpose and production machinery, including chip-making equipment and engines used in manufacturing. That meant that output, which fell faster than the 0.8% decline forecast in a Reuters poll of economists, dropped for the first time in three months.

“Output especially fell among capital goods makers, probably due to the strong impact from the chip shortages,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “It suggests its impact is widening even though the focus has been on the car industry.”

Automakers have been forced to curb production even as demand in key markets such as China rebounds, while they also have had to contend with soaring semiconductor demand at consumer electronic companies.

Toyota Motor Co (7203.T), the world’s biggest car seller, said this month it expected production to fall short of an annual target of 9 million vehicles for its current business year that runs until the end of March due to the drag from the chip shortage. read more

Last week, motor maker Nidec Corp’s (6594.T) third-quarter operating profit dipped as rising material prices and a shortage of semiconductors squeezed margins. The data showed output growth of cars and other vehicles slowed to 1.5% from the previous month in December, much weaker than the 43.7% surge in November and a 15.9% jump in October.

Some companies in the car industry had weathered the competition for chip supply better than others, a government official said. “Procurement is increasing, but the situation is different from firm to firm,” the official said.

Manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expected output to grow 5.2% in January and 2.2% in February. The forecasts likely didn’t include production cuts made after the Jan. 10 survey deadline, the official said.

Separate data showed retail sales were weaker than expected, rising 1.4% in December from a year earlier, which was smaller than the median market forecast for a 2.7% rise. That marked the third straight month of increases for retail sales, which were lifted by stronger demand for general merchandise and food and beverages.

Reporting by Daniel Leussink; Additional reporting by Yoshifumi Takemoto, Kantaro Komiya and David Dolan; Editing by Sam Holmes

BEIJING, Jan 27 (Reuters) – Oil prices fell on Thursday as investors cashed in profits from the 2% gains in the previous session after the U.S. Federal Reserve indicated an interest rate hike in March, leading to a technical correction in surging energy markets.

Futures pulled back amid a broader decline in financial markets triggered by the March interest rate increase telegraphed by the Fed and a surge in the U.S. dollar. Crude prices have surged amid the tensions between Ukraine and Russia, the world’s second-largest oil producer, that has fanned fears of disruptions of natural gas to Europe. Brent crude futures slipped 31 cents, or 0.3%, to $89.65 a barrel at 0122 GMT, after jumping about 2% to hit $90 for the first time in seven years on Wednesday.

U.S. West Texas Intermediate (WTI) crude futures also eased 26 cents, or 0.3%, to $87.09 a barrel, after gaining 2% in the previous session. “Continued supply challenges and mounting Russia-Ukraine tensions continue to support crude oil prices. It is down slightly today but I think it is nothing more than a technical move,” said Howie Lee, economist at OCBC in Singapore.

While the Russia-Ukraine tensions have a role in lifting oil prices, “real supply challenges both within OPEC and the U.S. … have been the main drivers in pushing the market higher,” Lee said, referring to the Organization of the Petroleum Exporting Countries (OPEC). OPEC missed its planned supply increase target in December, highlighting capacity constraints that are limiting supply as global demand recovers from the COVID-19 pandemic. read more

OPEC+, which includes OPEC and other allies such as Russia, is gradually relaxing 2020’s output cuts as demand recovers from the demand collapse that year. But many smaller producers can’t raise supply and others have been wary of pumping too much in case of renewed COVID-19 setbacks.

An increase in crude oil and gasoline inventories in the United States, the world’s biggest oil consumer, alleviated some of the concerns about supply.

Crude inventories rose by 2.4 million barrels in the week to Jan. 21 to 416.2 million barrels, compared with analysts’ expectations in a Reuters poll for a 728,000-barrel drop, the Energy Information Administration (EIA) said on Wednesday. Gasoline stocks =ECI rose by 1.3 million barrels last week to 247.9 million barrels, the EIA said, the most since February 2021.

Reporting by Emily Chow; Editing by Christian Schmollinger

SINGAPORE, Jan 21 (Reuters) – Asian share markets and U.S. futures fell on Friday, after U.S. stocks took a knock overnight, hurt by lingering concerns over the Federal Reserve’s tightening and weaker-than-expected economic and earnings data.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was down 0.8%, and Japan’s Nikkei (.N225) slid 1.66%. Oil prices fell sharply and were on track for their first weekly loss this year. “The selloff of U.S. stocks yesterday was brutal and will dominate Asia this morning,” said Rob Carnell, chief economist at ING in Singapore.

“But there are pockets of optimism like China’s more accommodating moves on monetary policy,” he added. The Nasdaq (.IXIC) dropped late in the U.S. session, to close 1.3% lower, as investors anxiously await the Fed’s policy meeting next week for details on how it intends to tackle inflation. Nasdaq futures were down 1% in Asian trading, hurt by Netflix Inc forecasting weak first-quarter subscriber growth after the close.

The moves extended to Chinese shares with the Hong Kong benchmark (.HSI) losing 0.24% after posting its best day in six months the day before and Chinese blue chips (.CSI300) losing 0.5% also after gains the day before.

China cut its benchmark mortgage rates on Thursday, the latest move in a round of monetary easing aimed at propping up an economy soured by the country’s troubled property sector and worries over the Omicron variant of coronavirus. read more

“The main divergence in equity market performance between the U.S. and Greater China can be attributed to a bifurcation in monetary policies,” said David Chao, global market strategist for Asia Pacific (ex-Japan) at Invesco.

China’s moves were “a very encouraging sign” but the Fed’s actions could add near-term market volatility, he said. Oil dropped as OPEC+ struggled to meet its scheduled increases in production targets and the spectre of Russia invading Ukraine sent jitters through global markets.

“Getting product out to market is a major factor weighing right now, because demand remains firm as the world slowly reopens,” ING’s Carnell, said. U.S. crude fell 2.44% to $83.46 per barrel on Friday morning and Brent crude lost 2.55% to $86.14.

U.S. Treasury yields were slightly lower along the curve on Friday, having risen sharply earlier in the week as investors positioned themselves for the likelihood that the Federal Reserve will tighten monetary policy more aggressively to stave off inflation.

Yields on benchmark 10-year notes were last at 1.7791%, their lowest in a week, having hit a two-year high of 1.902% on Wednesday. Rising yields had helped the dollar to gain earlier in the week, although on Friday the dollar index remained largely flat against a basket of six major currencies.

The greenback did, however, lose ground on the safe haven yen , falling to a one-week low of 113.8 per dollar, while the risk friendly Australian dollar AUD=D3> shed 0.39%. Spot gold remain mostly unchanged at $1,838.41 an ounce.

Reporting by Kanupriya Kapoor and Stella Qiu; additional reporting by Alun John; editing by Richard Pullin

Gold Price Forecast : Gold price is preserving the previous rally, as it sits close to fresh two-month highs of $1,844 reached in early Asia. The bullish potential in the bright metal appears intact despite the persistent strength seen around the US Treasury yields across the curve.

Gold price benefited amid soaring inflation in the UK and Germany, as investors boosted its demand as an inflation hedge. Meanwhile, US President Joe Biden also called out the Fed to rein in the fastest pace of inflation in decades.

Looking ahead, the yields price action and the US dollar valuations will continue to play, with all eyes on the Eurozone final CPI release. The US weekly Jobless Claims and Existing Home Sales data could also offer some trading incentives.

Gold (XAU/USD) pares the stellar gains posted the previous day around $1,839, down 0.22% intraday during the initial Asian session as market sentiment sours.

The yellow metal jumped to the two-month high on Wednesday after the US Treasury yields stepped back from a multi-day peak and drowned the US dollar. However, the latest speech from US President Joe Biden renewed hopes of faster monetary policy normalization by the Federal Reserve (Fed), which in turn favored bond coupons and dragged the gold prices.

US President Biden highlights Chief Trade negotiator Katherine Tai’s efforts to placate Sino-American trade tussles. However, he also mentioned that the US is “’not there yet’ on possible easing of tariffs on Chinese goods”. Biden also said, “China is not meeting its purchase commitments.”

Further, comments favoring Federal Reserve (Fed) Chairman Jerome Powell’s push to recalibrate the support also raised concerns over faster rate hikes and balance sheet normalization, which in turn exerted additional downside pressure on the gold prices. Additionally, US President Biden directly warned Russia not to invade Ukraine and if they do they’ll lose access to the US dollar.

Elsewhere, uncertainty surrounding the US stimulus and the People’s Bank of China’s (PBOC) next moves also weighed on the gold prices. US President Biden signaled that the talks on the Build Back Better (BBB) stimulus is on but US Senator Joe Manchin rejects the comments.

Further, the PBOC is up for conveying its Interest Rate Decision at 01:30 AM GMT with market players equally divided amid the Chinese central bank’s early signals of a rate cut and the latest comments from PBOC Deputy Governor Liu Guoqiang. The PBOC official mentioned that the central bank “will keep yuan exchange rate basically stable.”

Against this backdrop, the US 10-year Treasury yields rose 4.5 basis points (bps) to 1.87% whereas the S&P 500 Futures drop 0.15% intraday to portray the risk-off mood at the latest.

Even so, gold prices do trade beyond the short-term key resistance and hence today’s PBOC verdict, as well as risk catalysts, will be important for the watch during Asia. Following that, US Jobless Claims, Philadelphia Fed Manufacturing Survey for January and Existing Home Sales for December will entertain gold traders afterward.

SYDNEY, Jan 19 (Reuters) – The dollar was firm on Wednesday after a rip higher in U.S. yields vaulted it up sharply on the euro overnight, putting it back above support levels that have held for the past few months in anticipation of rising U.S. interest rates.

The euro fell about 0.7% on Tuesday, its sharpest daily drop in a month, and is back on its 50-day moving average at $1.1323. Two-year Treasury yields have leapt 15 basis points over two sessions to cross 1% and benchmark 10-year yields stand at a two-year high of 1.8842%.

The dollar has also regained support levels against the Australian and New Zealand dollars and held sterling below its 200-day moving average. The U.S. Federal Reserve meets to set policy next week and traders are growing anxious about another hawkish surprise.

“A lot of (Fed) officials left us with hawkish impressions right before going quiet (ahead of the meeting),” NatWest markets’ strategist Jan Nevrusi said.

“After (Tuesday’s) price action, there is slightly more than one hike priced in for the March meeting, and going into next week, I would imagine it oscillates within the lower end of the 25-50 basis point range.”

Fed funds futures are pricing three more hikes in 2022. Analysts say dollar strength could extend if traders start expecting rates to rise not just faster but further as well.

“We expect the U.S. rate rethink – and this latest shift higher in yields reflects a push higher in the implied terminal rate, rather than just a faster pace of increases initially – to support the dollar in the first half of the year,” Societe Generale strategist Kit Juckes said.

Moves in the U.S. bond market unsettled equity investors, underpinning the safe-haven yen , which has held at 114.67 to the dollar. The U.S. dollar index rose 0.5% on Tuesday and held that gain at 95.768 on Wednesday.

Traders also have a wary eye on a delicate situation in Ukraine. U.S. Secretary of State Antony Blinken will seek to defuse a crisis with Moscow when he meets Russia’s foreign minister in Geneva this week.

The Australian dollar held below its 50-day moving average at $0.7187. It has struggled to break resistance just below 73 cents. The kiwi was pinned at $0.6771.

Sterling has taken a knock in recent sessions but will be in focus later on Wednesday when British inflation figures are due. Annual headline inflation is seen hitting an almost decade-high 5.2% and a surprise could trigger further bets on Bank of England rate hikes and renew the pound’s rally.

Reporting by Tom Westbrook; Editing by Himani Sarkar

NEW YORK, Jan 5 (Reuters) – U.S. stocks fell sharply on Wednesday, with the Nasdaq plunging more than 3% in its biggest one-day percentage drop since February, after U.S. Federal Reserve meeting minutes signaled the central bank may raise interest rates sooner than expected.

The S&P 500 fell more than 1%, its biggest daily percentage decline since Nov. 26, the first day of trading after news of the Omicron variant of the coronavirus.

The S&P 500 and Nasdaq quickly extended their declines after the release of the minutes, which investors viewed as more hawkish than they had feared. The Dow, which hit a record high earlier in the day, reversed course and ended down more than 1%. The selloff was broad, with all S&P sectors ending in the red, and Wall Street’s fear gauge, the Cboe Volatility index (.VIX), closing at its highest level since Dec. 21.

In the minutes from the Fed’s Dec. 14-15 policy meeting, central bank policymakers said a “very tight” job market and unabated inflation might require the Fed to raise rates sooner and begin reducing its overall asset holdings as a second brake on the economy. read more

“Indications that the Fed is very concerned about inflation could quickly create a view that the Fed will aggressively tighten in 2022,” said David Carter, chief investment officer at Lenox Wealth Advisors in New York, calling the minutes “more hawkish than expected.”

The S&P 500 technology sector (.SPLRCT) fell 3.1% and was the biggest drag on the benchmark index, while the rate-sensitive real estate sector (.SPLRCR) dropped 3.2% in its biggest daily percentage decline since Jan. 4, 2021.

The Dow Jones Industrial Average (.DJI) fell 392.54 points, or 1.07%, to 36,407.11, the S&P 500 (.SPX) lost 92.96 points, or 1.94%, to 4,700.58 and the Nasdaq Composite (.IXIC) dropped 522.54 points, or 3.34%, to 15,100.17.

Rising interest rates increase borrowing costs for businesses and consumers, and higher rates can depress stock multiples, especially for technology and other growth stocks. Growth shares have been under pressure from a recent rise in U.S. Treasury yields. The Russell 2000 index (.RUT) also suffered its biggest one-day drop since Nov. 26, while the S&P 500 financials index (.SPSY)fell 1.3%, a day after it registered an all-time closing high.

Policymakers in December agreed to hasten the end of their pandemic-era program of bond purchases, and issued forecasts anticipating three quarter-percentage-point rate increases during 2022. The Fed’s benchmark overnight interest rate is currently set near zero.

Early in the day, an ADP National Employment report showed private payrolls increased by 807,000 jobs last month, more than double of what economists polled by Reuters had forecast. The report comes ahead of the Labor Department’s more comprehensive and closely watched nonfarm payrolls data for December on Friday.

Declining issues outnumbered advancing ones on the NYSE by a 4.32-to-1 ratio; on Nasdaq, a 4.22-to-1 ratio favored decliners. The S&P 500 posted 59 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 81 new highs and 307 new lows. Volume on U.S. exchanges was 12.18 billion shares, compared with the 10.4 billion average for the full session over the last 20 trading days.

Additional reporting by Stephen Culp in New York and Devik Jain and Shreyashi Sanyal in Bengaluru; Editing by David Gregorio