By David Morgan and Katharine Jackson

WASHINGTON (Reuters) - The Republican-controlled U.S. House of Representatives began debating the first of 12 fiscal 2024 spending bills on Wednesday, as lawmakers edged toward a looming showdown with the Democratic-led Senate that could trigger a government shutdown this autumn.

The House voted 217-206, roughly along party lines, to adopt a measure that opened debate on a military construction and veterans affairs appropriations bill, amid signs that Republican leaders were near an agreement with hardline conservatives who have demanded cuts that would leave next year's overall spending at a fiscal 2022 level of $1.47 trillion.

Hardline conservatives, including members of the House Freedom Caucus, warned Republican leaders this week that they would not support appropriations bills without assurances on spending.

Freedom Caucus member Andy Ogles told Reuters that the two sides were trying to finalize such a deal.

"It's a work in progress. Nothing's finalized. But I'm cautiously optimistic," Ogles said without providing details.

"Part of that process is how do you get assurances that will actually achieve that number," the Republican added.

McCarthy's office was not immediately available for comment.

The House is expected to vote on passage of the military construction bill later this week and could turn as early as Thursday to a second appropriations bill, which would fund agriculture programs, rural development initiatives and the Food and Drug Administration.

The agriculture bill could face resistance from more moderate Republican lawmakers, including some who oppose its restrictions on abortion services.

Representative Don Bacon said the legislation could also lose support from the center if last-minute changes led to further cuts in spending. "If these guys keep pushing for more cuts, it may be in jeopardy," the Republican said.

House Speaker Kevin McCarthy and other Republican leaders hope this week's votes will give them the upper hand against the Democratic-led Senate. Each chamber is expected to pass its own spending legislation and then try to hammer out compromise bills that can be sent to Democratic President Joe Biden.

Lawmakers have until the current fiscal year expires on Sept. 30 to fund the government or risk a partial government shutdown.

But with hardliners pushing for lower spending, the House and Senate are at least $120 billion apart, with Senate appropriators aiming at the $1.59 trillion in fiscal 2024 discretionary spending agreed by McCarthy and Biden in June.

House Majority Leader Steve Scalise said negotiations between the two chambers could begin during the annual August recess in an effort to move them toward agreement in September.

Biden on Monday vowed to veto the House Republican spending bills if they make it to his desk, saying they backed away from the deal.

The military and veterans bill would provide $155.7 billion in discretionary spending for military construction and veterans affairs. The health and agriculture bill would provide $25.3 billion, but that includes about $7.5 billion moved from Democratic programs.

Democrats rejected the military construction bill, saying it would slash important programs and impose "a kitchen sink of culture wars" on the military and veterans.

"It would prohibit training that helps people from different backgrounds work together, that addresses the inequalities that still exist in our military. It would allow homophobia to run rampant," said Democratic Representative Teresa Leger Fernandez.

By Balazs Koranyi and Francesco Canepa

FRANKFURT (Reuters) - The European Central Bank will raise interest rates for the ninth time in a row on Thursday and keep the door open to further moves as persistent inflation and growing evidence of an economic downturn pull policymakers in opposing directions.

Fighting off a historic surge in prices, the ECB has lifted borrowing costs by 4 percentage points since last July and essentially promised another quarter-point increase this month, making Thursday's decision the easiest all year.

But the central bank for the 20 countries that use the euro is likely to ditch its practice of signalling its next move, promising a "data-dependent" approach instead. That will leave investors guessing whether another rate hike is coming in September or if July marks the end of the ECB's fastest-ever tightening spree.

One thing is clear, however: the end of rate increases is fast approaching and the debate appears to be about just one more small move before rate hikes are halted for what some policymakers think will be a long time.

The ECB's problem is that inflation is coming down too slowly and could take until 2025 to fall back to 2%, as a price surge initially driven by energy has seeped into the broader economy via large mark-ups and is fuelling the cost of services.

While overall inflation is now just half its October peak, harder-to-break underlying price growth is hovering near historic highs and may have even accelerated this month.

The labour market is also exceptionally tight, with record-low unemployment raising the risk that wages will rise quickly in the years ahead as unions use their increased bargaining power to recoup real incomes lost to inflation.

That is why many investors and analysts are looking for the ECB to pull the trigger again in September and stop only if autumn wage data delivers relief.

"Some timely indicators as the Indeed Wage Tracker, which tracks listed wages on job postings, has shown some softening during 2023, but the labour market impulse to inflation still appears way too strong on most broad wage measures," Danske Bank economist Piet Haines Christiansen said.

More tightening would be consistent with comments from a host of policymakers, including ECB board member Isabel Schnabel, that raising rates too far would still be less costly than not doing enough.

Fuelling the ECB's bias for more hikes, the U.S. Federal Reserve also raised borrowing costs on Wednesday and kept the door open to further tightening, hinting that price pressures could still prove more stubborn than some expect.

"We see little room for an easing of the hawkish bias just yet," Societe Generale (OTC:SCGLY)'s Anatoli Annenkov said. "We still see mainly upside risks to inflation and expect a final 25 basis point hike in September before the focus shifts to the balance sheet at the end of the year."

RECESSION?

But rapidly fading economic prospects should temper any hawkishness and ECB President Christine Lagarde is likely to take a cautious tone after a string of data in recent days suggested that higher rates are already weighing on growth.

Indicators of business, investor and consumer sentiment and bank lending surveys point to a continued deterioration after the euro zone skirted a recession last winter.

And with manufacturing in a deep recession and a previously resilient services sector showing signs of softening despite what is likely to be a superb summer holiday season, it is hard to see where any rebound would come from.

Such weakness, exacerbated by a loss of purchasing power after inflation eroded real incomes, could push down price pressures faster than some expect, leaving less work for the central bank.

"A pause after July would likely require further falls in realised core inflation, downward revisions in staff inflation forecasts and more signs of monetary policy transmission in the real economy," Nordea's Jan von Gerich said, adding that his baseline is for July to be the ECB's last move.

By Nell Mackenzie and Carolina Mandl

LONDON/NEW YORK (Reuters) - Property markets knocked by high interest rates and the end of cheap financing have caught the eye of hedge funds.

U.S. and European commercial property markets face lingering office vacancies, diminished retail activity and higher refinancing costs, while investors are wary of highly indebted Chinese property.

Five hedge funds shared five trading ideas on global property markets, adding that they cannot reveal trading positions for regulatory reasons.

1/ VARADERO CAPITAL

* New-York based credit hedge fund

* Size: $2.8 billion

* Founded in 2009

* Key trade: buy commercial mortgage-backed securities issued 2012-2016

Jonathan Mizrachi, co-head of commercial real estate, believes there are bargains to be found in commercial mortgage backed securities (CMBS), or bonds which hold mortgages grouped together by their credit risk.

"Investors are generalizing CMBSs, everything is commercial mortgage backed and everything commercial mortgage backed is bad," he said, adding that some are trading at attractive prices.

Mizrachi mainly focuses on the mezzanine, or intermediate tranches of CMBSs, issued between 2012 and 2016. These now trade at a discount and contain fewer loans with lots of historical data, so are easier to analyze, he said.

2/ BALCHUG CAPITAL

* Size: $2 billion

* Founded: 2010

* Key trade: buy Russia commercial real estate

CEO of Armenian hedge fund Balchug Capital, David Amaryan, recently purchased one of Moscow's biggest malls, and is looking to buy more properties from investors leaving Russia.

Russia's invasion of Ukraine and the sanctions that followed meant many Western firms have left Russia-based operations.

Investors from countries such as Armenia are acceptable to both Russian and international authorities, said Amaryan.

"They are not getting what the assets were worth before the conflict but the discounted price is a reasonable one given that Balchug is taking the risk," he said.

3/ BEACH POINT CAPITAL MANAGEMENT

* U.S. based fund specialising in credit related investments

* Size: $14.8 billion

* Founded: 2009

* Key trade: shorting commercial real estate investment trust stocks

Ben Hunsaker, portfolio manager and head of structured credit at Beach Point Capital Management said a good shorting opportunity was to invest in sell options, or buy puts, on commercial mortgage real estate investment trust stocks (CM-REITs).

CM REITs are companies that own mortgages of multi-family residential homes as well as commercial real estate loans. The stocks of these companies, or REITs, trade without a discount. They are also packed with other kinds of debt, he added.

This debt might include collateralised loan obligations, reverse repurchase agreements and unsecured high yield corporate debt.

"Certain pockets of U.S. multi-family lending has parallels to subprime and CDOs back during the financial crisis," Hunsaker added.

Given the speed at which some of the underlying loans were issued at just after COVID-19, Hunsaker believes the values of these loans will soon fall, bringing down the prices of the publicly traded common stocks of the CM-REITs which contain them.

4/ Land & Buildings

* Activist hedge fund

* $500 million

* Founded 2008

* Key trade: short life and sciences real estate investment trusts

Jonathan Litt, founder and chief investment manager of Land & Buildings, suggests a short position on life and science real estate investment trusts (REITs) -- which own and invest in office and laboratory space to foster the research and developments of new drugs.

A short position is a bet that an asset's price will weaken.

Cell phone data Litt bought to research a REIT run by Alexandria Real Estate Equities, showed that buildings which that were supposed to be almost fully occupied were only half full.

Alexandria Real Estate responded pointing to public filings which said that it was the advancement of science and related intellectual property in Alexandria’s Labspace buildings, and not employee foot traffic that drove its demand for space.

But Litt believes that the shift away from office working will also hurt life and sciences real estate, generally.

"This is going to be a problem and people haven't seen it yet," said Litt.

5/ ANSON FUNDS

* Multi-strategy hedge fund

* Size: $1.6 billion

* Founded in 2003

* Key trade: long British homebuilder Vistry Group

Anson CIO Moez Kassam reckons Vistry shares are likely to rise further following a recent $1.4 bln acquisition of rival Countryside that could bolster its affordable housing business.

"Vistry leveraged its strong balance sheet to snap up a key competitor, capitalizing on depressed valuations and dislocation in the sector," he said.

Vistry last week flagged an intensifying housing slowdown, but retained its annual profit forecast citing resilient demand in its affordable homes business.

Its shares are up 28% this year and Kassam sees potential for further gains, with affordable housing companies tending to be more resilient than traditional homebuilders during downturns.

Vistry declined to comment on the hedge fund's views.

BANGKOK (Reuters) - Thailand's finance ministry has lowered its 2023 economic growth outlook to 3.5% from 3.6% projected earlier, as tourism gathers strength but tepid global demand crimps exports, officials said on Wednesday.

Exports, a key driver of the Thai economy, are forecast to contract 0.8% this year, compared with a previous forecast for a 0.5% drop, Pornchai Thiraveja, head of the ministry's fiscal policy office, told a briefing.

Southeast Asia's second-largest economy has been supported by increased domestic consumption and a recovery in the tourism sector, officials have said.

The economy expanded by a more-than-expected 2.7% in the first quarter from a year earlier. Last year's economic growth was 2.6%.

The ministry maintained a forecast of tourism arrivals of 29.5 million foreign tourist arrivals this year, Pornchai said.

Pre-pandemic 2019 saw a record of nearly 40 million foreign tourists, who spent 1.91 trillion baht ($55.43 billion). Tourism accounted for about 12% of gross domestic product (GDP).

The ministry predicted average headline inflation at 1.7%this year, compared with 2.6% projected earlier, and against a 24-year high of 6.08% last year.

It forecast the baht level of 34.01 baht per dollar this year.

($1 = 34.46 baht)

By Kevin Buckland

TOKYO (Reuters) - The dollar hovered close to a two-week high versus the euro on Wednesday, while the yen consolidated near the middle of its range this month as traders awaited crucial policy decisions from the nations' central banks this week. The Australian dollar slid after benign inflation data suggested the Reserve Bank of Australia would forgo a rate hike next week.

The U.S. dollar index - which measures the currency against six major peers, but is heavily weighted toward the euro - edged 0.06% higher to 101.37 in the Asian morning, after pushing as high as 101.65 overnight for the first time since July 11.

The euro slipped 0.16% to $1.1042, bringing it close to the previous session's low of $1.1036, a level last seen on July 12.

Continued signs of a resilient U.S. economy in the face of the Federal Open Market Committee's (FOMC) steep series of interest rate increases has helped buoy the dollar index from a 15-month trough of 99.549 reached a week ago.

In the latest data, U.S. consumer confidence increased to a two-year high in July amid a persistently tight labor market and receding inflation.

Money market traders see a quarter point hike from the U.S. Federal Reserve on Wednesday as a near certainty, but are split on the odds of another later in the year, putting it at more or less a coin toss.

Meanwhile, the European Central Bank sets policy on Thursday. Again, a quarter point hike is widely expected, but building evidence of an economic slowdown has called into question the chances of another by year end.

"Given the deceleration in underlying inflation, we think the risk is (Fed Chair Jerome) Powell cools on another hike by describing the FOMC as 'data dependent,'" which would pressure the dollar, said Joseph Capurso, a strategist at Commonwealth Bank of Australia (OTC:CMWAY).

"If the ECB retain their hawkish bias, by no means guaranteed but more likely than the FOMC, EUR is likely to track higher this week."

The Bank of Japan sets policy on Friday, and speculation for a hawkish tweak to the yield curve control (YCC), which had soared earlier in the month, has steadily receded over recent days.

The dollar added 0.12% to 141.15 yen on Wednesday, following a rebound from a multi-week low of 137.245 mid-month.

The Australian dollar slid 0.63% to $0.67505 after inflation slowed more than expected in the June, suggesting less pressure for another hike in interest rates for the central bank on Aug. 1.

That unwound most of the Aussie's 0.79% gain of the previous day, after Beijing announced stimulus, lifting the economic outlook for Australia's key trading partner.

"Just when it looked safe to get back in the water with Aussie longs on the China sentiment rebound, the downside surprise on inflation casts fresh doubt on the extent of further RBA tightening needed," said Sean Callow, a strategist at Westpac, predicting the currency would drop below $0.67 near term.

By Lucia Mutikani

WASHINGTON (Reuters) - U.S. consumer confidence increased to a two-year high in July amid a persistently tight labor market and receding inflation, bolstering the economy's prospects in the near term.

But the economy is not out of the woods, with the survey from the Conference Board on Tuesday offering mixed signals. Consumers remain fearful of a recession over the next year following hefty interest rate hikes from the Federal Reserve.

While more consumers planned to buy a motor vehicle or house in the next six months, fewer anticipated purchasing major household appliances like refrigerators and washing machines.

Consumers also continued to report that they intended to spend less on discretionary services, including travel, recreation and gambling. They, however, expected to increase spending on healthcare, as well as streaming services from home.

That supports economists' views that consumer spending was flattening out after rising at its fastest pace in two years in the first quarter. Still, the survey joined data on inflation, the housing market and retail sales in raising optimism that the economy could skirt a recession this year.

"We seem to be in an unusual eddy in this expansion, with consumer confidence up but consumer spending clearly leveled off," said Robert Frick, corporate economist with Navy Federal Credit Union in Vienna, Virginia. "Lower inflation is why confidence has surged, but Americans have become cautious, trimming spending and increasing savings."

The Conference Board's consumer confidence index increased to 117 this month, the highest reading since July 2021, from 110.1 in June. Economists polled by Reuters had expected the index to increase to 111.8.

The improvement in confidence was across all age groups, with the largest increase among consumers aged 35 and below. Confidence was higher among consumers with annual incomes below $50,000 as well as those making more than $100,000.

Consumers' perceptions of the likelihood of a recession over the next year rose, but stayed below the recent peak earlier in the year. About 70.6% of consumers this month said a recession was "somewhat" or "very likely," up from 69.9% in June.

The share expecting better business conditions over the next six months was the highest since January.

The survey was published as Fed officials started a two-day policy meeting. The U.S. central bank is expected to raise interest rates by 25 basis points on Wednesday after keeping borrowing costs steady in June. The Fed has raised its policy rate by 500 basis points since March 2022.

Stocks on Wall Street were trading higher. The dollar was little changed against a basket of currencies. U.S. Treasury prices fell.

TIGHT LABOR MARKET

"This likely reveals consumers' belief that labor market conditions will remain favorable," said Dana Peterson, the Conference Board's chief economist.

The survey's so-called labor market differential, derived from data on respondents' views on whether jobs are plentiful or hard to get, widened to 37.2 this month from 32.8 in June, a sign labor market conditions remain tight despite job growth slowing. This measure correlates to the unemployment rate in the Labor Department's closely followed employment report.

Consumers' 12-month inflation expectations slipped to 5.7%, the lowest reading since November 2020, from 5.8% last month.

The improvement in inflation expectations was, however, not enough to convince more consumers to make big-ticket purchases over the next six months. And while more households planned to buy houses, they could run into affordability challenges.

House prices have resumed their upward trend because of tight supply after earlier slowdowns and outright declines in some regions as higher mortgage rates depressed demand. With the labor market still resilient, demand for housing is rising again. But many homeowners have mortgage loans with rates below 5%, reducing the incentive to put their houses on the market.

A separate report from the Federal Housing Finance Agency on Tuesday showed monthly house prices rising 0.7% in May after increasing by the same margin in April. Prices climbed 2.8% in the 12 months through May after advancing 3.1% in April.

"Low inventory and surprisingly resilient housing demand have kept home prices stable or rising in many markets," said Lisa Sturtevant, chief economist at Bright MLS in Alexandria, Virginia.

"But we are going to hit an affordability ceiling in many places which will happen just as more inventory begins to come on line later this year. As a result, it's possible that the 'bottoming out' of home prices is just the first half of a 'W-shaped' pattern in the market."

By Andrea Shalal

WASHINGTON (Reuters) - The International Monetary Fund on Tuesday raised its 2023 global growth estimates slightly given resilient economic activity in the first quarter, but warned that persistent challenges were dampening the medium-term outlook.

The IMF in its latest World Economic Outlook said inflation was coming down and acute stress in the banking sector had receded, but the balance of risks facing the global economy remained tilted to the downside and credit was tight.

The global lender said it now projected global real GDP growth of 3.0% in 2023, up 0.2 percentage point from its April forecast, but left its outlook for 2024 unchanged, also at 3.0%.

The 2023-2024 growth forecast remains weak by historical standards, well below the annual average of 3.8% seen in 2000-2019, largely due to weaker manufacturing in advanced economies, and it could stay at that level for years.

"We're on track, but we're not out of the woods," IMF chief economist Pierre-Olivier Gourinchas told Reuters in an interview, noting that the upgrade was driven largely by first-quarter results. "What we are seeing when we look five years out is actually close to 3.0%, maybe a little bit above 3.0%. This is a significant slowdown compared to what we had pre-COVID."

This was also related to the aging of the global population, especially in countries like China, Germany and Japan, he said. New technologies could boost productivity in coming years, but that in turn could be disruptive to labor markets.

The outlook is "broadly stable" in emerging market and developing economies for 2023-2024, with growth of 4.0% expected in 2023 and 4.1% in 2024, the IMF said. But it noted that credit availability is tight and there was a risk that debt distress could spread to a wider group of economies.

The world is in a better place now, the IMF said, noting the World Health Organization's decision to end the global health emergency surrounding COVID-19, and with shipping costs and delivery times now back to pre-pandemic levels.

"But forces that hindered growth in 2022 persist," the IMF said, citing still-high inflation that was eroding household buying power, higher interest rates that have raised the cost of borrowing and tighter access to credit as a result of the banking strains that emerged in March.

"International trade and indicators of demand and production in manufacturing all point to further weakness," the IMF said, noting that excess savings built up during the pandemic are declining in advanced economies, especially in the United States, implying "a slimmer buffer to protect against shocks."

While immediate concerns about the health of the banking sector - which were more acute in April - had subsided, financial sector turbulence could resume as markets adjust to further tightening by central banks, it said.

The impact of higher interest rates was especially evident in poorer countries, driving debt costs higher and limiting room for priority investments. As a result, output losses compared with pre-pandemic forecasts remain large, especially for the world’s poorest nations, the IMF said.

LOWER INFLATION

The IMF forecast that global headline inflation would fall to 6.8% in 2023 from 8.7% in 2022, dropping to 5.2% in 2024, but core inflation would decline more gradually, reaching 6.0% in 2023 from 6.5% in 2022 and easing to 4.7% in 2024.

Gourinchas told Reuters it could take until the end of 2024 or early 2025 until inflation came down to central bankers' targets and the current cycle of monetary tightening would end.

The IMF warned that inflation could rise if the war in Ukraine intensified, citing concern about Russia's withdrawal from the Black Sea grain initiative, or if more extreme temperature increases caused by the El Nino weather pattern pushed up commodity prices. That in turn could trigger further rate hikes.

The IMF said world trade growth is declining and will reach just 2.0% in 2023 before rising to 3.7% in 2024, but both growth rates are well below the 5.2% clocked in 2022.

The IMF raised its outlook for the United States, the world's largest economy, forecasting growth of 1.8% in 2023 versus 1.6% in April as labor markets remained strong.

It left its forecast for growth in China, the world's second-largest economy, unchanged at 5.2% in 2023 and 4.5% in 2024. But it warned that China's recovery was underperforming, and a deeper contraction in the real estate sector remained a risk.

The fund cut its outlook for Germany, now forecast to contract 0.3% in 2023 versus a 0.1% contraction in April, but sharply upgraded its forecast for the UK, now expected to grow 0.4% versus a 0.3% contraction forecast in April.

Euro zone countries are expected to grow 0.9% in 2023 and 1.5% in 2024, both up 0.1 percentage point from April.

Japan's growth was also revised upward by 0.1 percentage point to 1.4% in 2023, but the IMF left its outlook for 2024 unchanged at 1.0%.

INTEREST RATES STILL RISING

The rise in central bank policy rates to fight inflation continues to weigh on economic activity, the IMF said, adding that the U.S. Federal Reserve and the Bank of England were expected to raise rates by more than assumed in April, before cutting rates next year.

It said central banks should remain focused on fighting inflation, strengthening financial supervision and risk monitoring. If further strains appeared, countries should provide liquidity quickly, it said.

The fund also advised countries to build fiscal buffers to gird for further shocks and ensure support for the most vulnerable.

"We have to be very vigilant on the health of the financial sector ... because we could have something that basically seizes up very quickly," Gourinchas said. "There is always a risk that if financial conditions tighten, that can have a disproportionate effect on emerging market and developing economies."

The IMF said unfavorable inflation data could trigger a sudden rise in market expectations regarding interest rates, which could further tighten financial conditions, putting stress on banks and nonbank institutions - especially those exposed to commercial real estate.

"Contagion effects are possible, and a flight to safety, with an attendant appreciation of reserve currencies, would trigger negative ripple effects for global trade and growth," the IMF said.

Fragmentation of the global economy given the war in Ukraine and other geopolitical tensions remained another key risk, especially for developing economies, Gourinchas said. This could lead to more restrictions on trade, especially in strategic goods such as critical minerals, cross-border movements of capital, technology and workers, and international payments.

(Reuters) - New U.S. light vehicle sales volumes are set to rise again in July as easing supply-chain snags help automakers ramp up production to meet pent-up demand, automotive research firm S&P Global (NYSE:SPGI) Mobility said on Monday.

S&P projects new light vehicle sales to reach 1.33 million units in July, up 18% year-over-year. It also upgraded the 2023 U.S. light vehicle sales forecast to 15.4 million units, from 15.1 million estimated earlier.

Top global automakers have reported a rise in second-quarter new vehicle sales on improving supply and strong demand, signaling that rising interest rates are yet to have a meaningful impact on purchases.

"New light vehicle sales will continue to progress in July, reflecting the current trend of sustained demand levels to the fleet sector while retail sales continue to climb," said Chris Hopson, principal analyst at S&P Global Mobility.

In the second half of the year, however, high inflation could lead to affordability issues while production advances build up inventory quicker than anticipated, S&P said.

A look at the day ahead in European and global markets from Tom Westbrook

Earnings and hope for a turning in China's markets are the prelude to this week's big central bank decisions.

Microsoft (NASDAQ:MSFT), Google parent Alphabet (NASDAQ:GOOGL), Visa (NYSE:V), recruiter Robert Half (NYSE:RHI), General Electric (NYSE:GE), 3M, Dow, chipmaker Texas Instruments (NASDAQ:TXN) and grain dealer Archer-Daniel Midlands are among the heavyweights and highlights in the United States.

Unilever (NYSE:UL), LVMH and EssilorLuxottica report in London and Paris.

The corporate performance and outlook risk disappointing markets that are increasingly priced for a "soft-landing" slowdown in both growth and inflation.

In the Asia session investors cheered pledges of support in the readout from an earlier-than-expected Politburo meeting in China -- though not too loudly.

Property stocks in Hong Kong surged, only they had spent much of the past week or two descending deeper into the discount cellar so gains came from a low base. The Hang Seng rose about 3% and the Shanghai Composite roughly 2%, but neither is roaring out of recent ranges.

The yuan jumped, but it had help from China's state banks, which sources said were buying onshore and offshore early in the Asian day.

Morgan Stanley (NYSE:MS) analysts made much of the absence in the readout of a familiar line that "property is for living not for speculation" and the addition of a pledge to "optimise" policy.

"Investors should recall that the early stage of COVID easing was labelled as 'optimised' policy, which led to a complete change of the policy later," they wrote. Traders are buying it today, but may not do so tomorrow while a cash crunch looms over giant names like Country Garden and Dalian Wanda.

The Eurozone bank lending survey is also out on Tuesday and can give a view on the health of borrowing ahead of Fed and European Central Bank meetings, which are both expected to deliver rate hikes.

The yen was steady in Asia as investors weigh whether the Bank of Japan will tweak policy on Friday.

Key developments that could influence markets on Tuesday:

Economic events: German LFO surveys, Eurozone bank lending survey

Earnings: Unilever, EssilorLuxottica, LVMH, Danaher (NYSE:DHR), Microsoft, Alphabet, Texas Instruments, Verizon (NYSE:VZ), Visa, General Electric, General Motors (NYSE:GM), 3M, ADM, Spotify (NYSE:SPOT), Snap (NYSE:SNAP), Dow

By Rae Wee

SINGAPORE (Reuters) - The euro hit a two-week low on Tuesday as a worsening downturn in euro zone business muddied the bloc's rate outlook against a still-hawkish European Central Bank (ECB), while the dollar rose ahead of this week's trio of major central bank meetings.

The offshore yuan strengthened in early Asia trade, following comments from China's top leaders on Monday pledging to step up policy support for its flailing economy.

The euro was shaky at $1.1063, up just 0.02% having slumped to a two-week low of $1.1059 earlier in the session, after a survey on Monday showed euro zone business activity shrank much more than expected in July, reigniting recession fears.

The single currency had slid more than 0.5% in the previous session.

"The extension of the weakness in the manufacturing sector as well as services, and Germany, in particular, being a lot weaker than expected ... that's putting some question marks around the rhetoric that we should expect from the ECB on Thursday," said Rodrigo Catril, senior currency strategist at National Australia Bank (OTC:NABZY) (NAB).

Markets have fully priced in a 25-basis-point rate hike by the ECB at its meeting this week, though the path of future rate increases beyond July remains up in the air.

Elsewhere, sterling fell 0.11% to $1.2811, while the U.S. dollar index steadied at 101.39.

Flash PMI survey similarly out in the UK on Monday showed Britain's private sector growing at its weakest pace in six months in July, while a separate survey pointed to U.S. business activity slowing to a five-month low this month.

The Federal Reserve also meets this week and is expected to deliver a 25 bp rate hike, with a majority of economists polled by Reuters expecting that to mark the last increase of the central bank's current tightening cycle.

"While the Fed meeting (in July) is likely to be uncontroversial in terms of the decision on interest rates, the Fed's statement and the press conference will be extremely relevant for markets," said Guillermo Felices, global investment strategist at PGIM Fixed Income.

"Incoming activity data has been stronger than expected in June and July," he said. "The Fed will have to explain what they make of the resilient U.S. economy."

The yen remained under pressure at 141.43 per dollar, struggling to recover from its heavy losses on Friday on a Reuters report that the Bank of Japan is leaning towards keeping its yield control policy unchanged at this week's policy meeting.

The offshore yuan rose nearly 0.5% to 7.1540 per dollar, with investors encouraged by comments from China's top leaders at the closely-watched Politburo meeting signalling more support for its weakening economy, though many were still seeking out specific details on greater stimulus measures.

"We view the assessment of the economic growth situation and description around the property market as slightly more dovish than expected, though we still await specific easing measures after (the) statement," said analysts at Goldman Sachs (NYSE:GS) in a note.

"We continue to expect a combination of monetary, fiscal, property and consumption support measures to be rolled out in the next few months."

The Australian dollar, often used as a liquid proxy for the yuan, gained 0.18% to $0.67515, while the kiwi rose 0.06% to $0.6209.