By Nell Mackenzie and Iain Withers

LONDON (Reuters) - Retail investors are pulling out of Europe's hedge fund industry, with assets under management shrinking to an eight-year low according to data released on Monday, as higher interest rates and lagging performance send smaller investors elsewhere.

Assets in alternative 'UCITS' funds in Europe shrank 3% to $236.3 billion at the end of March from three months earlier, according to research provider Kepler Absolute Hedge, which has data going back to 2016. The drop was faster than the 0.4% decline seen in the previous two quarters, Kepler said.

UCITS, or undertakings for collective investment in transferable securities, are a type of fund sold in the European Union which are heavily regulated to make them safer and more accessible to the public.

While UCITS have proved popular overall - accounting for 12 trillion euros ($12.9 trillion) of assets at end-2022, according to industry data - they have fallen out of favour with investors chasing higher returns.

"Hedge fund UCITS are rightly getting a lot of flak from investors lately. In fact, they increasingly strike me as an ice cube sitting in the sun," said Harald Berlinicke, partner at Sarnia Asset Management.

"As many investors have found out the hard way, handcuffing hedge fund managers by imposing tighter restrictions...may have defeated the purpose."

UCITS funds place restrictions on the leverage and risk-taking that enable other funds bought by institutional investors to juice up their returns.

In the first three months of 2024, UCITS funds tracked by Kepler averaged a 2.9% return compared with the 4.4% averaged by the wider hedge fund industry, according to research firm HFR.
 

Overall assets fell by $7.6 billion from alternative UCITS funds in the first quarter, mostly from multi-strategy, macro-economic and deals focused funds, while some hedge fund strategies like managed futures saw growth, Kepler's report showed.

Swiss private bank Julius Baer has been pulling client funds from UCITS hedge funds, according to a January client note seen by Reuters in which Chief Investment Officer Yves Bonzo cited poor returns and high fees, adding that offshore rivals had "systematically outperformed" them.

Julius Baer declined to comment.

Private equity giant Blackstone (NYSE:BX) closed its multi-strategy UCITS fund in November, after assets fell nearly 90% in four years.

($1 = 0.9295 euros)

By Wayne Cole

SYDNEY (Reuters) - Asian shares crept to 15-month highs on Monday in a week where inflation figures could make or break hopes for earlier U.S. rate cuts, while Chinese activity data will test optimism about a sustained recovery in the world's No. 2 economy.

Beijing has already reported a welcome pickup in inflation to an annual 0.3% in April, helping to soothe worries about a slide into prolonged deflation. Forecasts favour further gains in April retail sales and industrial output due on Friday.

Chinese authorities are also set to sell 1 trillion yuan($138.24 billion) in longer-dated bonds to help fund stimulus spending at home.

The improved sentiment has helped lift Chinese blue chips to a seven-month high. The index was 0.1% softer on Monday with some sectors pressured by reports the White House was about to release details of new tariffs on Chinese goods.

MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.2%, after rallying for three weeks straight.

Japan's Nikkei was flat, still saddled with speculation further losses for the yen could lead the Bank of Japan to raise rates in the next few months.

The central bank sent a hawkish signal to markets on Monday by cutting the amount of Japanese government bonds it offered to buy in a regular operation, so pushing yields up.

Globally, much now depends on whether the U.S. April inflation report will show a moderation after three months of upside surprises. Median forecasts are for core consumer prices to rise 0.3% in the month, compared to 0.4% in March, pulling the annual rate down to 3.6%.

So crucial are the data that rounding to the second decimal place could make all the difference.

"Our unrounded core CPI forecast at 0.27% m/m suggests larger risks for a dovish surprise to a rounded 0.2% increase," noted analysts at TD Securities.

A low number would likely boost bets the Federal Reserve could ease as soon as July, which is currently priced at only a 25% chance. Equally, a high inflation print could push a rate cut out past September and challenge pricing for 42 basis points of easing this year.

Also due are figures on U.S. producer prices, retail sales and jobless claims, along with final reports on European inflation that should reinforce expectations for a June rate cut from the European Central Bank.

There are a host of Fed speakers this week to update markets on their thinking, including Fed Chair Jerome Powell who appears with the head of the Dutch central bank on Tuesday.

UPBEAT US EARNINGS

EUROSTOXX 50 futures were steady, while FTSE futures dipped 0.2%. S&P 500 futures and Nasdaq futures were both little changed early on Monday, after rallying last week as company earnings came in strong.

With 80% of the S&P 500 having reported results, companies are on track to have increased earnings by 7.8%, well ahead of the April expectation of 5.1%.

Once Nvidia (NASDAQ:NVDA) reports on May 22, Magnificent Seven quarterly earnings are on track to jump 49%, according to Tajinder Dhillon, senior research analyst at LSEG.

Companies reporting this week include Walmart (NYSE:WMT), Home Depot (NYSE:HD) and Cisco (NASDAQ:CSCO).

Global share indices have also bounced to record highs in recent weeks, even as markets have scaled back some of their more aggressive wagers for rate cuts this year.

"A straightforward interpretation of financial market performance is that there is more underlying strength in the global economy than had been anticipated and higher interest rates are reflecting rather than impeding global growth," says Bruce Kasman, head of economic research at JPMorgan.

"We lean in this direction as our 2024 growth and policy rate forecasts both move higher."

The relative outperformance of the U.S. economy continues to underpin the dollar, while only the threat of Japanese intervention is stopping it from re-testing the 160 yen barrier.

The dollar was holding firm at 155.92 yen on Monday, while the euro was flat at $1.0770 having faced resistance around $1.0791 last week.

Gold eased a touch to $2,358 an ounce, after rising 2.5% last week on demand from momentum funds and talk of persistent buying by China. [GOL/]

Oil prices faded late last week as U.S. gasoline and distillate inventories rose ahead of the start of the summer driving season. [O/R]

Brent was down another 22 cents at $82.57 a barrel, while U.S. crude dipped 17 cents to $78.09 per barrel.

($1 = 7.2339 Chinese yuan renminbi)

SEOUL (Reuters) - South Korea's financial watchdog said on Monday it was expanding and toughening the assessment of real estate projects in a bid to speed up restructuring of the sector.

House prices in South Korea have been falling since June, 2023, as high interest rates weighed on demand, and worries about debt repayments at construction firms have grown after a mid-sized builder's decision in December to reschedule its debt.

"Despite the recent rise in delinquency rates of real estate project financing amid a sluggish property market, there have been limitations to sort out unprofitable projects for an orderly restructuring," the Financial Supervisory Service said in a statement.

The delinquency rate of real estate projects climbed to 2.70% by the end of last year, up from 1.19% a year before and 0.37% at end-2021, according to FSS.

Under the new guidelines, which will come into effect from June, more loans and financial institutions will be subject to profitability assessments related to real estate projects with more detailed criteria for a better evaluation of risks.

The FSS said it would also tighten its supervision of financial institutions to make sure they take follow-up actions on real estate projects over default risk after assessments.

To help ensure a soft-landing for the real estate market, commercial banks and insurance firms have prepared a syndicated loan of one trillion won ($731.62 million). The funds will be used to ensure there is sufficient demand and liquidity during the restructuring process and the amount could be raised to a maximum of five trillion won if needed, the FSS said.

Investing.com -- U.S. inflation data will be front and center this week and could be the deciding factor in the near-term direction for markets. Meanwhile, retail sales data along with earnings results from some big-name retailers will give fresh insights into the strength of consumer spending, a key driver of the economy. The UK and China are to release what will be closely watched economic data. Here’s what you need to know to start your week.

Inflation numbers

Investors will be looking at the U.S. producer price index and consumer price index data this week for any indication that price pressures are finally easing after months of strong inflation gave rise to fears that the Federal Reserve may not cut interest rates this year.

Markets got some relief earlier this month when Fed Chair Jerome Powell indicated that the central bank was still looking to eventually cut rates and the latest U.S. employment report showed signs of cooling in the labor market.

Analysts expect Wednesdays crucial CPI report to show underlying inflation rising 3.6% on a year-over-year basis, which would be the smallest increase in over three years.

But a hotter-than-expected inflation reading would likely price out rates cuts for the rest of the year, reigniting market volatility.

Retail earnings

Investors will get some fresh insights into the health of the U.S. consumer this week with April retail sales data on Wednesday, plus earnings results from major retailers Walmart (NYSE:WMT) and Home Depot (NYSE:HD).

So far, bullish investors have gained confidence from a solid earnings season. Standouts included generally strong reports from most of the so-called Magnificent Seven tech and growth giants whose shares helped propel the market higher last year and continue to have a huge weighting in the S&P 500.

Strong earnings have “got investors feeling more comfortable about being in this market," Art Hogan, chief market strategist at B Riley Wealth told Reuters. However, “the trajectory of inflation is always going to be important to us while we're in a cycle where we expect the next thing for the Fed to do is to cut rates."

China data

China is to publish a string of economic data on Friday that will show how the world’s number two economy was performing at the start of the second quarter.

April home price data will give fresh insights into the state of the property sector which has been engulfed by a debt crisis for about three years now, leaving property developers on the brink of collapse.

Industrial production, retail sales and fixed asset investment are seen accelerating year on year.

Comments from policymakers at last month’s Politburo meeting have primed investors for a wave of stimulus measures from Beijing to boost economic recovery, keeping the market mood buoyant for now.

UK data

Last week the Bank of England moved closer to cutting interest rates, but markets are divided on whether a first cut will come at the bank’s next meeting in June or whether policymakers will hold out for longer.

Two official sets of employment data and two rounds of inflation figures are due before the BoE’s next meeting on June 20.

The first of the two jobs reports on Tuesday will be closely watched for signs that pay increases are fueling price pressures. Annual pay growth is still running hot, while labor supply is stagnating.

Economists are expecting average weekly earnings, excluding bonuses, to have risen by an annual 5.9% in the first quarter. While still solid, signs that wage growth is moderating would likely bolster expectations for a June cut.

Oil prices

Oil prices ended last week little changed with Brent logging a 0.2% loss, while crude futures recorded a rise of 0.2%.

Expectations that U.S. interest rates could remain higher for longer have weighed on oil prices as higher interest rates typically slow economic activity and weaken oil demand.

The stronger U.S. dollar has also weighed, making greenback-denominated commodities more expensive for buyers using other currencies.

Oil prices have also been pressured by rising U.S. fuel inventories coming into the typically robust summer driving season.

Prices found some support after data on Thursday showing China imported more oil in April than the same month last year. China's exports and imports returned to growth in April after contracting the previous month.

Energy traders will be looking at this week’s inflation data which will dictate the future direction of interest rates.

(Reuters contributed reporting)

By Moayed Kenany, Adam Makary and Timour Azhari

BAGHDAD (Reuters) -Chinese companies won five more bids to explore Iraqi oil and gas fields, Iraq's oil minister said on Sunday, as the Middle Eastern country's hydrocarbon exploration licensing round continued into its second day.

Chinese companies have been the only foreign players to win bids so far, taking licenses covering 10 oil and gas fields since Saturday, while Iraqi Kurdish company KAR Group took two.

The oil and gas licences for 29 projects in total are mainly aimed at ramping up output for domestic use, with more than 20 companies pre-qualifying, including European, Chinese, Arab and Iraqi groups.

Iraq wanted this licensing round - the country's sixth - in particular to increase output of natural gas, that it wants to use to fire power plants that rely heavily on gas imported from Iran. However, no bids were made on at least six fields with gas potential, potentially undermining those efforts.

Also notably no U.S. oil majors have been involved, even after Iraqi Prime Minister Mohammed Shia met representatives of U.S. companies on an official visit to the United States last month.

Among specific awards, China's CNOOC (NYSE:CEO) Iraq won a bid to develop for oil exploration Iraq's Block 7, that extends across the country's central and southern provinces of Diwaniya, Babil, Najaf, Wasit and Muthanna, said oil minister Hayan Abdul Ghani.

ZhenHua, Anton Oilfield Services and Sinopec (OTC:SHIIY) won bids to develop the Abu Khaymah oilfield in Muthanna, the Dhufriya field in Wasit and the Sumer field in Muthanna, respectively, the minister said.

China's Geo-Jade won a bid to develop Iraq's Jabal Sanam field for oil exploration in Basra province, Iraq's oil minister added.

Iraq, OPEC's second-largest oil producer behind Saudi Arabia, has been hampered in its oil sector development by contract terms viewed as unfavourable by many major oil companies, as well as recurring military conflicts and growing investor focus on environmental, social and governance criteria.

By Suban Abdulla and David Milliken

LONDON (Reuters) -Britain's economy grew by the most in nearly in three years in the first quarter of 2024, ending the shallow recession it entered in the second half of last year and delivering a boost to Prime Minister Rishi Sunak ahead of an election.

The Office for National Statistics said gross domestic product expanded by 0.6% in the three months to March, the strongest expansion since the fourth quarter of 2021 when it grew by 1.5%.

A Reuters poll of economists had pointed to a 0.4% expansion of gross domestic product in the January-to-March period, after GDP shrank by 0.3% in the final quarter of 2023.

Friday's data will be welcome news for Sunak who said the economy had "turned a corner", although the opposition Labour Party, which has a large lead in opinion polls, has accused Sunak and finance minister Jeremy Hunt of being out of touch to think voters are feeling better off.

"There is no doubt it has been a difficult few years, but today’s growth figures are proof that the economy is returning to full health for the first time since the pandemic," Hunt said.

The Bank of England, which held interest rates at a 16-year high on Thursday, forecast quarterly growth of 0.4% for the first quarter of this year and a smaller 0.2% rise for the second quarter.

Sterling strengthened against the U.S. dollar immediately after the figures were released.

On a monthly basis, the economy grew by 0.4 % in March, faster than the 0.1% growth forecast by economists in a Reuters poll.

Britain remains one of the slowest countries to recover from the effects of the coronavirus pandemic.

At the end of the first quarter of 2024, the country's economy was just 1.7% bigger than its level in late 2019, before the pandemic, with only Germany among the G7 faring worse.

By Naomi Rovnick and Yoruk Bahceli

LONDON (Reuters) -The Bank of England has sent a new signal that borrowing costs will fall earlier and further across Europe than in the United States, setting markets up for major shifts as investors play a monetary policy divide opening up across the Atlantic.

Investors see European stocks and debt leading global markets this year as rate cuts boost spending, softer inflation burnishes bonds and weaker currencies lift exports.

Traders stepped up bets for UK easing after the BoE on Thursday held rates at 16-year highs of 5.25% but trimmed inflation forecasts, pushing sterling down and stocks higher.

That came after Sweden cut rates for the first time since 2016, while Switzerland cut rates in March and the European Central Bank has flagged a June cut. In contrast, the U.S. Federal Reserve is set to keep rates high for longer.

"This is the European pivot," said Florian Ielpo, head of macro at Switzerland's Lombard Odier Investment Management, who is positive on European and UK stocks. Since 2020, the United States has generated the lion's share of global equity gains.

Paul Flood, multi-asset portfolio manager at Newton Investment Management, said he was buying UK stocks on valuation grounds and was positive on UK government bonds because there was more potential for BoE rate cuts ahead.

DOVES FLY

Britain's exporter-focused FTSE 100 hit a new record high after the BoE meeting. Europe's Stoxx 600 index is up 2% so far this week, poised for its best week since January.

Money markets are pricing in around 55 basis point (bps) of BoE rate cuts in total by year-end, 70 bps from the ECB and just 43 bps from a Fed still grappling with strong inflation.

Economists polled by Reuters expect the U.S. economy to expand by 2.5% this year, versus 0.5% in the euro zone and 0.4% in the UK, as lavish government spending dubbed "Bidenomics" spurs investment but raises debt and the deficit.

In terms of growth momentum, investors see Europe doing better, boding well for assets in the region over the longer term.

"Europe is really accelerating, albeit from a weaker base at a time where the U.S. economy is cooling from a stronger starting point," said Hugh Gimber, global market strategist at J.P. Morgan Asset Management.

Investors are querying whether the U.S. will run out of steam, other strategists said.

But in the short term, if the U.S. can run up its debt and its deficit, then rates in the US will likely stay higher than in Europe, said Societe Generale (OTC:SCGLY) strategist Kit Juckes.

RISKY PIVOTS

European government bonds could outperform the U.S. but are likely to stay volatile as the inflation path worldwide remains unpredictable, investors and analysts said.

The BoE, the ECB and other European central banks might regret sounding too dovish too soon, Lombard Odier's Ielpo said.

In the U.S., the Fed sent a strong signal in December that rate cuts were coming but then turned more hawkish after financial conditions became euphoric and inflation stalled above its target.

UK gilts have lost investors 3.1%, this year, compared with 2.1% losses in the U.S. and 1.2% in the euro zone, based on LSEG data.

BlueBay Asset Management portfolio manager Neil Mehta said the firm does not like bonds in the UK, partly because of relatively high inflation.

The yield on Britain's rate-sensitive two-year gilt slipped 3 bps after the BoE decision to 4.28% as debt prices firmed slightly.

The BoE last diverged significantly from Fed policy in August 2016, when it cut rates by a quarter point to insulate the economy from Brexit while the Fed was on hold and preparing to raise.

The ECB was a holdout dove with rates below zero from 2014 to 2022 but has followed the Fed since.

The divergence theme would mostly play out in currency markets, Mehta added, with the dollar staying strong, in a further risk for inflation in Europe as import prices rise.

The euro is down 2.6% so far this year to $1.07, Sterling is down roughly 2%.

Matthew Swannell, economist at BNP Paribas (OTC:BNPQY), said this was not a particular risk for UK, whose biggest trading partner is the European Union.

"So we do think the Bank of England can move before the Federal Reserve, and likewise the ECB (can too)," he said.

By Ashitha Shivaprasad

(Reuters) - Gold prices firmed on Friday, poised for their best week since April 5, following recent economic data that boosted bets of an interest rate cut from the Federal Reserve.

Spot gold gained 0.2% at $2,350.87 per ounce by 0212 GMT after hitting a more than two-week high earlier. Prices have risen 2.2% so far this week.

U.S. gold futures rose 0.7% to $2,356.90.

Data on Thursday showed that the number of Americans filing new claims for unemployment benefits increased more than expected last week.

"Gold has regained its mojo this week courtesy of some softer U.S. macro data. Initial jobless claims figures were worse than expected, which comes hot on the heels of the weaker NFP (nonfarm payrolls) figures last Friday, indicating that the jobs market may be starting to loosen up," said Tim Waterer, chief market analyst at KCM Trade.

Traders expect the Fed to start its easing cycle in September. Lower interest rates reduce the opportunity cost of holding gold.

The inflation reports have the potential to shift the "needle with regards to the expected rate cutting timeline," if inflation is shown to be edging lower, gold could be a beneficiary, Waterer added.

The U.S. producer price index and consumer price index data are due next week.

There is "considerable" uncertainty about where U.S. inflation will head in the coming months, San Francisco Fed President Mary Daly said on Thursday.

Elsewhere, a senior Israeli official said the latest round of indirect negotiations in Cairo to halt hostilities in Gaza had ended and Israel would proceed with its operation in Rafah.

Spot silver was up 0.2% to $28.38 per ounce and was set to register its best week since April 5.

Platinum firmed 0.6% to $983.78 and palladium rose 0.5% to $971.50. Both metals were set for weekly gains.

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WASHINGTON (Reuters) -U.S. President Joe Biden is set to announce new China tariffs as soon as next week targeting strategic sectors, according to a person familiar with the matter.

The full announcement, which could take place as soon as Tuesday, is expected to largely maintain existing levies, according to the person. An announcement could also be pushed back, the person said.

Details on the precise value or categories of tariffs that would be imposed were sketchy, but the administration was said to have zeroed in on areas of interest within strategic competitive and national security areas, the person said.

Biden, a Democrat seeking re-election in November, is looking to contrast his approach with that of Republican candidate Donald Trump, who has proposed across-the-board tariffs.

Specific sectors were set to include electric vehicles, batteries and solar equipment, according to Bloomberg News, which first reported the story.

The measures could invite retaliation from China at a time of heightened tensions between the world's two biggest economies.

In 2022, Biden launched a review of the Trump-era policy under Section 301 of the U.S. trade law. Last month, he called for sharply higher U.S. tariffs on Chinese metal products.

The Biden administration has also been pressuring neighboring Mexico to prohibit China from selling its metal products to the United States indirectly from there.

The White House declined to comment while the office of the U.S. Trade Representative did not immediately respond to a Reuters request for comment.

TOKYO (Reuters) - Japan's consumer spending kept shrinking for a 13th straight month in March, government data showed on Friday, creating challenges for policymakers seeking to engineer self-sustaining economic growth and normalise monetary policy.

Household spending fell 1.2% in March from a year earlier, the data showed, against economists' median forecast for a 2.4% drop and following a 0.5% decline in February.

On a seasonally adjusted, month-on-month basis, spending increased 1.2%, versus an estimated 0.3% contraction and a 1.4% rise in February.

Separate data from Thursday showed Japanese real wages in March shrank for two straight years, as the rising cost of living outpaced nominal wages.

Weak household consumption is a source of concern among Japanese policymakers who want to see sustained economic growth led by strong wage hikes and solid consumer spending.