A look at the day ahead in European and global markets from Wayne Cole.

It's been a nervy start to the week in Asia as concerns about China's debt-laden property sector take a toll on stocks and the yuan, which hit its lowest in a month despite a strong fix from the PBOC.

Chinese blue chips lost 1.1%, on top of a 3.4% decline last week. Shares of Country Garden slid more than 12% to all-time lows after the real estate company suspended trading in 11 of its onshore bonds.

Data on bank lending and credit on Friday were just the latest dire reading, though all the chatter about deflation is a bit premature. One month of negative consumer prices is not really deflation, which is defined as a sustained fall in the price level across an economy.

Core inflation actually doubled to 0.8% y/y and the drop in consumer prices was largely driven by year-ago volatility in pork prices. While pork is important in China, it's hardly the entire economy.

Still, western analysts argue Chinese consumers need to save less and spend more to get the economy moving, and Beijing seems to be taking an almost moral view on consumption, like it's a sin. That puts the focus on retail sales on Tuesday where a rise of 4.7% is forecast, though a wide range of estimates from +2.8% to +10.8% suggests a surprise is possible.

The same goes for U.S. retail sales on Tuesday where the median is for a 0.4% increase, but BofA is tipping 0.7% based on credit and debit spending in the month. A strong result would presumably be positive for corporate earnings but also challenge the market's sanguine view on the Fed, where futures are pricing a 70% chance the tightening cycle is over.

That would not be welcome news to Treasuries, which are being forced to cheapen to maintain demand as the government borrows large to fund its $1.6 trillion budget deficit.

Yields on 10-year notes crept up to 4.18% on Monday and within spitting distance of the 2023 top of 4.206%, a break of which would be bearish for a test of last year's 4.337% high.

With the Bank of Japan keeping JGB yields around 0.62%, the widening spread lifted the dollar to a fresh 2023 peak of 145.22 yen on Monday. Anything above 145.00 risks Japanese intervention, but bulls have their eyes on the top from last October at 151.94.

The dollar is also flying on the Aussie and kiwi and a range of emerging Asian currencies, which are being dumped as proxies for China risk.

Key developments that could influence markets on Monday:

- German wholesale prices for July feature in an otherwise empty diary

(By Wayne Cole; Editing by Jacqueline Wong)

By Clare Jim

HONG KONG (Reuters) -Chinese property giant Country Garden's shares plunged to fresh record low on Monday, while its offshore bonds were also pressured after its onshore paper was suspended from trading as its debt problems deepened.

Markets remain jittery as the trouble in China's largest private property developer could have a chilling effect on homebuyers and financial institutions, further dampening the prospect of a near-term recovery in the sector and the broader economy.

A core pillar of China's economy, the real estate sector has already seen plunging sales, tight liquidity and a series of developer defaults since late 2021.

Shares of Country Garden shed more than 15% to HK$0.83 in morning trading, dragging down the Hang Seng Mainland Properties Index which dropped 4.6%. The stock has lost nearly 50% so far this month.

Country Garden's offshore bonds also eased, with a few trading at the lower end of 6 cents on the dollar. Its January 2031 bond traded at 6.071 cents as at 0228 GMT, according to data by Duration Finance.

In separate filings during the weekend, the firm said it would suspend trading in 11 of its onshore bonds from Monday, and their resumption of trading would be determined at a later date.

The move followed reports on Friday that the company was heading for a debt restructuring, after it missed payments of two dollar bond coupons due on Aug. 6 totalling $22.5 million.

Once considered a more financially sound developer, Country Garden's woes added to spillover concerns across a property market already grappling with weak buyer demand.

State-owned China Jinmao said in a filing on Sunday it expected to post a 80% decline in net profit in the first half of this year, due to a drop in gross profit margin in some projects and decrease in land development revenue. Its Hong Kong-listed shares slumped over 7% on Monday.

By Daniel Leussink

TOKYO (Reuters) - Japanese automakers are getting much-needed cover from an old standby, as the weaker yen helps prop up profits amid declining sales in China and the increasingly tough shift to electric vehicles.

Toyota, Honda and Nissan (OTC:NSANY) recently reported earnings that topped analyst estimates by 6% to 21% in the three months through June, and all cited the currency as a factor.

"If the yen stays low, they clearly benefit but it doesn't offset any other concerns," said Satoru Aoyama, senior director at Fitch Ratings Japan.

"They are struggling in the Chinese market," he said. "They just don't have an immediate solution" for their problems there, he added.

Nissan late last month upgraded its full-year operating profit forecast, raising it by 30 billion yen ($208 million) to 550 billion yen. About 20 billion yen of that came from the currency, CFO Stephen Ma told a briefing.

A weak yen has traditionally lifted profits for Japan's big exporters, although it is no longer as large a boon for automakers that have increased their overseas manufacturing in recent years.

Automakers' shares are quick to react to swings in the yen, although the companies themselves tend to stick to conservative forecasts for the currency.

For instance, Toyota has stuck to its forecast for an average exchange rate of 125 to the dollar this business year, a level not seen since April 2022, about a month after the U.S. Federal Reserve started raising interest rates. The yen was at 144 on Thursday.

At smaller Subaru (OTC:FUJHY), a move of one yen against the dollar has a 20 billion yen impact on operating profit, CFO Katsuyuki Mizuma said earlier this month.

On Wednesday, a Honda official said its April-June operating profit came in tens of billions of yen higher than expected, with the weak yen accounting for about half of that.

"The yen wasn't only weak against the dollar, but also against other currencies, including in Asia and Europe, so that comes through as a profit," the official said.

CHINA STRUGGLE

The yen's cushion couldn't come at a better time for Japanese automakers, which are struggling in China. The world's largest auto market is increasingly being dominated by home-grown players.

Nissan's China sales to retail customers slumped 46% during the quarter and those of Honda were down 5%.

Sales of Toyota, including of its Lexus luxury brand, rose over the period. For the first half of the calendar year, they declined almost 3%.

Japanese automakers have also been slow to pivot to the growing global market for electric vehicles with competitive offerings.

It is unclear how long the weak yen will last. Japan's central bank recently tweaked its cap on bond yields, sparking expectations it could eventually exit the ultra-loose policy that has weighed on the currency.

Influential former finance ministry official Eisuke Sakakibara told Reuters the yen could strengthen to 130 by the end of the year.

Subaru has kept its forecast at 128 yen, CFO Mizuma said, citing the difficulty in predicting the currency.

"We're really closely watching exchange rates," he said.

($1 = 144.2400 yen)

Investing.com -- Wednesday’s minutes of the Federal Reserve’s July meeting will be closely watched as investors look for guidance on the near-term path of interest rates. Retail sales data and retail earnings will give insights into the health of consumer spending while data out of China is expected to underline concerns over the faltering recovery in the world’s number two economy. Here’s what you need to know to start your week.

Fed minutes

Before markets start turning their attention to the Fed’s annual get together in Jackson Hole, Wyoming at the end of the month, investors will be focusing on Wednesday’s minutes from the central bank’s July policy meeting.

The Fed raised rates by 25 basis points last month and left the door open to another hike in September. The minutes will help investors gauge the appetite for further rate increases, although markets are betting on a pause in September.

Data last week showed that while U.S. consumer and producer prices increased moderately in July the overall trend indicated that inflationary pressures are easing.

The U.S. central bank has increased interest rates by 5.25 percentage points since March 2022 to bring inflation back down to its 2% goal.

U.S. economic data

The U.S. is to release July retail sales data on Tuesday which is expected to show a pickup in demand at the start of the third quarter after a smaller-than-expected increase in June.

Other data is expected to indicate that the manufacturing sector is still struggling - the Empire State manufacturing index is expected to fall into negative territory, while the Philly Fed manufacturing index is expected to remain in negative territory.

Data on the housing sector is expected to be more positive with reports on building permits and housing starts on Wednesday expected to show signs of stabilization.

The U.S. is also to release the weekly report on initial jobless claims on Thursday which is expected to tick lower after a larger than expected increase last week.

Retail earnings

Second-quarter earnings season is winding down with S&P 500 results presenting a mixed picture - companies are beating analysts' profit expectations at the highest rate in nearly two years even as revenue beats dropped to the lowest since early 2020.

The largest U.S. retailers are set to report their results this week, which will give investors an important insight into the health of consumer spending, a major driver of the U.S. economy.

Home Depot (NYSE:HD) is due to report ahead of the open on Tuesday, Target (NYSE:TGT) will deliver results on before Wednesday’s market open, followed a day later by Walmart (NYSE:WMT). Other major retailers such as Macy’s (NYSE:M) Nordstrom (NYSE:JWN), Kohl’s (NYSE:KSS) and Lowe’s (NYSE:LOW) will report in the coming weeks.

Investors will be focusing on what retailers have to say about how inflation is affecting margins as higher prices erode households’ spending power.

Chinese data

China’s post-COVID economic recovery has faltered in recent months after a strong first quarter, weighed down by weak demand at home and abroad.

Beijing is to release data on retail sales, industrial production and fixed asset investment on Tuesday, which are expected to point to only modest gains.

Data last week showed that China's consumer prices posted their first annual decline in more than two years in July, adding to pressure on policymakers to do more to shore up the economy.

Authorities have pledged to roll out measures to support the economy, though details have been scant, disappointing investors.

Oil price gains

Oil prices rose on Friday after the International Energy Agency forecast record global demand and tightening supplies, pushing prices higher for the seventh consecutive week, the longest streak of gains since 2022.

Demand touched an all-time high of 103 million barrels per day in June and could rise to a fresh peak this month, the IEA predicted.

Meanwhile, output cuts from Saudi Arabia and Russia set the stage for a sharp decline in inventories over the rest of 2023, which IEA said could drive oil prices even higher.

Supply cuts and an improving economic outlook have created more optimism among oil investors, OANDA analyst Craig Erlam told Reuters. However, he noted signs momentum was wearing thin after a sustained rally.

--Reuters contributed to this report

SYDNEY (Reuters) - The head of Australia's central bank on Friday said policy was in the "calibration stage" as the worst was over for inflation, though some further policy tightening might be needed depending on incoming data and evolving risks.

Appearing before lawmakers, outgoing Reserve Bank of Australia (RBA) Governor Philip Lowe said the recent data are consistent with the economy continuing to travel along the "narrow path" to a soft landing in which inflation eases without unemployment rising dramatically.

Inflation, which peaked late last year at over a three decade high of 7.8%, trended down to 6% last quarter and is projected to return to the RBA's target band of 2-3% in late 2025.

After a substantial increase of 400 basis points in interest rates since May last year, Lowe said policymakers were in the "calibration stage", as rates are already restrictive and working to establish a balance between supply and demand.

"Looking forward, it is possible that some further tightening of monetary policy will be required to ensure that inflation returns to target within a reasonable time frame," Lowe said, reiterating earlier comments.

"Whether or not this is the case will depend upon the data and the Board's evolving assessment of the outlook and risks."

This is Lowe's (NYSE:LOW) last such appearance given the government chose not to reappoint him when his first term ends in mid-September, instead elevating Deputy Governor Michele Bullock.

Lowe acknowledged it has been a difficult year for Australians.

"But the worst is over and we're getting to a place now to return to inflation back to target and a stronger labour market than we had before the pandemic," said Lowe.

The RBA's aggressive rate hikes have pushed up the cash rate to a decade-high of 4.1%, though it did pause in July and August to assess whether inflation was heading lower as desired.

Financial markets and analysts are split on whether there might be one more rate rise later this year..

Lowe added that rates would have to be 100 basis points above current levels to get inflation down to target in 2024.

By Swati Verma

(Reuters) -Gold prices held near one-month lows on Friday, shrugging off cooler-than-expected U.S. inflation figures for last month, with bullion staying on course to wrap up its worst week in seven as the U.S. dollar and bond yields stood strong.

Spot gold edged 0.1% higher to $1,913.95 per ounce by 0347 GMT, but traded near its lowest level since July 7 touched earlier in the day. U.S. gold futures were down 0.1% at $1,946.20.

Gold gained as much as 0.8% on Thursday after data showed the U.S. consumer price index (CPI) climbed 3.2% on an annual basis, but was less than the Reuters poll forecast of 3.3%, raising bets that the U.S. central bank will unlikely hike interest rates again in 2023.

Interest rate increases weigh on gold because they tend to lift bond yields and in turn raise the opportunity cost of holding non-yielding bullion.

"Once the CPI dust had settled, markets seemed to remember that core CPI at 4.7% is still not great – even if it was slower than expected," said Matt Simpson, a senior analyst at City Index, adding that gold's move higher lacked conviction.

"We also had Fed member Mary Daly putting a fly in the dovish ointment, saying whether another hold or hike at the Fed's next meeting is 'yet to be determined'. And that saw the U.S. dollar regain its strength."

Gold prices have slid about 1.4% so far in the week as the U.S. dollar index and benchmark 10-year Treasury bond yields were both on track for their fourth consecutive weekly gain. [USD/] [US/]

Among other precious metals, spot silver rose 0.2% to $22.72 an ounce and platinum added nearly 1% to $915.06. Still, both were on track for their fourth straight weekly loss.

Palladium jumped 0.9% to $1,298.30, eyeing its best week since mid-June.

Gold stays near 1-month lows as US dollar, yields hold ground

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By Prerana Bhat

BENGALURU (Reuters) - The European Central Bank will pause a more than year-long rate-hiking campaign in September, according to a narrow majority of economists polled by Reuters, but a further rise by year-end is still on the cards with inflation running hot.

There have been nine consecutive ECB rate rises since July 2022. But bank President Christine Lagarde began paving the way for a pause by telling a news conference after last month's 25 basis point hike: "Do we have more ground to cover? At this point in time I wouldn't say so."

Faced with slowing activity - particularly in the 20-member bloc's No.1 economy Germany - Lagarde also said incoming data would be crucial for future decisions, and either a hike or pause in September was a "decisive maybe".

In the poll 37 - or 53% - of 70 economists predict no move at the Sept 14 meeting compared with 47% in last month's poll, which would mean the ECB leaving its deposit rate at 3.75%, in line with market pricing.

The poll also showed 53% expecting a deposit rate rise to 4.00% sometime this year, with 33 economists saying September, and four October or December.

While markets are priced for a roughly 60% chance of a pause in September, they are split for year-end, with just over a 50% probability of a 4.00 deposit rate by then.

"Our baseline sees the ECB on hold for an extended period. However, inflation setbacks could still force a rate hike later this year," said Bas van Geffen, senior macro strategist at Rabobank.

"With the ECB remaining data-dependent, September and October pose the biggest risks for another rate hike should data fail to give the (Governing) Council the confidence inflation is gradually converging to target."

STICKY INFLATION

Flash data out last week showed core euro zone inflation, which strips out volatile food and energy, stuck at 5.5% in July and headline inflation, which the ECB targets at 2%, down only slightly to 5.3%.

Core inflation is forecast to average 5.0% this year and 2.9% in 2024 according to the poll, higher than the 2.5% headline forecast for next year.

Overall inflation was not seen at the 2.0% target until 2025 at the earliest, and more than 90% of economists polled see no rate cuts before the second quarter of 2024.

If the ECB hikes once more as the consensus view narrowly predicts, that would mean the highest deposit rate since the euro was introduced in 1999 and would amount to a combined 450 basis points of hikes in the current cycle.

The surge in price pressures initially driven by soaring energy costs has seeped into the broader economy and continues to weigh on consumer demand.

Germany has been one of the economies hardest hit by spillovers from the war in Ukraine and high energy prices, spelling trouble for the euro zone economy as a whole.

Despite revised data showing the 20-member bloc narrowly escaping a recession, its future prospects are not bright.

The euro zone economy will grow 0.1% and 0.2% in the current and next quarter, respectively, and average growth of 0.9% in 2024, the survey showed.

Sluggish economic growth was one of the major reasons for the ECB to signal an end to its hiking cycle from saying it had "more ground to cover" a few months back.

"We expect the economy to broadly stagnate over the next few quarters as the euro area will face several headwinds from high uncertainty, the lagged impact of the ECB tightening cycle... and less fiscal support," said Michael Kirker, European economist at Deutsche Bank (ETR:DBKGn).

(For other stories from the Reuters global economic poll:)

By Luc Cohen and Chris Prentice

NEW YORK (Reuters) - The U.S. Treasury Department will soon propose a rule that would effectively end anonymous luxury-home purchases, closing a loophole that the agency says allows corrupt oligarchs, terrorists and other criminals to hide ill-gotten gains.

The long-awaited rule is expected to require that real estate professionals such as title insurers report the identities of the beneficial owners of companies buying real estate in cash to the Treasury's Financial Crimes Enforcement Network (FinCEN).

FinCEN is slated to propose the rule sometime this month, according to its regulatory agenda, though the timeline could slip, said two people briefed on the developments. Anti-corruption advocates and lawmakers have been pushing for the rule, which will replace the current patchwork reporting system.

Criminals have for decades anonymously hidden ill-gotten gains in real estate, Treasury Secretary Janet Yellen said in March, adding that as much as $2.3 billion was laundered through U.S. real estate between 2015 and 2020.

"That's why FinCEN is taking this important step to put something officially on the books that would root out money laundering through the sector once and for all," said Erica Hanichak, government affairs director of advocacy group the FACT Coalition.

Some advocates say FinCEN, which declined to comment on the timing of the proposal, has moved too slowly. Officials first said in 2021 that they planned to implement the rule.

FinCEN has been struggling to complete a related rule that would unmask shell company owners. A bipartisan group of lawmakers has pressed FinCEN to tighten up that proposal, according to an April public letter. That debate has slowed down FinCEN's work on the real estate reporting rule, one of the sources said.

The American Land Title Association, which represents title insurers, says it welcomes the new rule but that FinCEN should delay it until the shell company rule is completed.

The proposed rule will be open to public and industry feedback.

PATCHWORK

While banks have long been required to understand the source of customer funds and report suspicious transactions, no such rules exist nationwide for the real estate industry.

Instead, FinCEN has operated real estate purchase disclosure rules, known as geographic targeting orders (GTOs), in just a handful of cities including New York, Miami and Los Angeles. The new rule is expected to effectively expand GTOs nationwide.

FinCEN implemented GTOs in 2016 after the New York Times revealed that nearly half of luxury real estate was bought by anonymous shell companies.

But the orders are easy to skirt by simply buying property outside the targeted areas, said Jodi Vittori, an expert on illicit finance at the Carnegie Endowment for International Peace.

Transparency advocates pushing for a nationwide rule point to the example of Guo Wengui, an exiled Chinese businessman who, according to prosecutors, used an anonymous shell company to channel illicit profit from a fraud scheme into the $26 million purchase of a 50,000-square-foot New Jersey mansion in December 2021.

Had Guo brought property across the Hudson (NYSE:HUD) River in Manhattan, it would have been subject to a GTO and likely flagged immediately to law enforcement.

Guo, a onetime business partner of former Donald Trump adviser Steve Bannon, has pleaded not guilty to fraud charges. His lawyers did not respond to a request for comment.

A FinCEN spokesperson said GTO reports provide valuable data.

Howard Master, a formal federal prosecutor, said law enforcement uses them to generate leads, but mainly to learn more about assets owned by individuals already under investigation.

"It'll identify an asset that is beneficially owned by someone that you might not otherwise have known about," said Master, now a partner at investigations firm Nardello & Co.

A 2020 report by the Government Accountability Office, Congress' investigative arm, found that nearly 7% of GTO reports identified individuals or entities connected to ongoing FBI cases. But the same report highlighted concerns about the ability of FinCEN, which has complained of chronic underfunding, to police the program.

For the new rule to be effective, FinCEN will need more enforcement resources, said David Szakonyi, a political science professor at George Washington University.

"FinCEN needs more people and more computers to process the information."

By Safiyah Riddle

(Reuters) - U.S. mortgage delinquency rates fell to a record low in the second quarter due to a strong job market and low interest rates prevailing on most home loans despite the big jump in mortgage rates over the last two years, a report on Thursday said.

Delinquency rates fell to 3.37% at the end of the second quarter, according to the Mortgage Bankers Association’s National Delinquency Survey, their lowest since the MBA began collecting data in 1979 and down from 3.64% year-on-year.

Seriously delinquent loans, which are 90 days or more past due or in the process of foreclosure, fell to the lowest non-seasonally adjusted rate in 23 years at 1.61%.

Economists are watching mortgage delinquency rates closely for signs of weakness amidst the Federal Reserve's aggressive 525 basis point interest rate increase since March 2022, which increased the cost of borrowing across the board.

While the MBA said many borrowers have been able to withstand surging mortgage costs in large part due to a resilient job market and strong wage growth throughout the year, most homeowners are also paying interest rates well below those charged on new loans.

Real estate brokers estimated in June that more than eight in 10 loans outstanding featured at rate below 5% at the end of 2022, well below the MBA's most recent contract rate above 7%. More than six in 10 pay 4% or less.

While the share of those paying such low rates is declining, many homeowners are opting to remain where they are rather than move and take on a new loan at current rates, which are approaching a 22-year high.

Despite the historically low delinquency rate, the MBA said not every borrower has been able to withstand the recent stress of hiked interest rates.

The delinquency rate on loans for low-income and first-time buyers, backed by the Federal Housing Administration (FHA), edged up 10 basis points annually to 8.95% in the second quarter.

Separately on Thursday, the National Association of Realtors released a report showing that the median home price in the second quarter fell 2.4% year-on-year to $406,000, albeit with significant variations nationwide.

“Home sales were down due to higher mortgage rates and limited inventory,” said NAR chief economist Lawrence Yun. “Affordability challenges are easing due to moderating and, in some cases, falling home prices, while the number of jobs and incomes are increasing.”

(Reuters) - European stocks rose on Thursday as investors digested a slew of corporate earnings and awaited U.S. inflation print that will likely determine the Federal Reserve's monetary policy path.

The pan-European STOXX 600 added 0.4% by 0707 GMT, having closed at a one-week high in the previous session.

U.S. stock futures rose ahead of data expected to show a slight acceleration in July consumer prices. On a month-to-month basis, CPI is seen increasing 0.2%, the same as in June. [.N]

Europe's personal & household goods sector, which houses the largest luxury brands, gained 1.1% after China lifted its pandemic-era restrictions on group tours for more countries.

Lifting insurers, Germany's Allianz (ETR:ALVG) gained 2.1% and Zurich Insurance rose 1.6% after both the companies reported better-than-expected results.

Limiting gains, Siemens slumped 3.5% after the German engineering group missed third-quarter profit estimates.

Denmark's Novo Nordisk (NYSE:NVO) slipped nearly 1% after the drugmaker said it will continue to restrict U.S. supplies of starter doses of its hugely popular Wegovy weight-loss drug.