By Stella Qiu

SYDNEY (Reuters) -Australian consumer price inflation slowed to a 3-1/2 year low in the third quarter, though the core measure was still sticky and reinforced market wagers that the central bank won't start cutting rates until next year.

Overall, the report was rather mixed, with consumers benefiting from government rebates on electricity and a drop in petrol, while services price pressures persisted. 

That kept market reaction muted. Investors slightly pared the chance of a rate cut from the Reserve Bank of Australia this December and next February to just 24% and 44%. Markets still see April next year as the most likely timing for the first easing.

Data from the Australian Bureau of Statistics on Wednesday showed the consumer price index (CPI) rose 0.2% in the third quarter, under forecasts of a 0.3% increase. 

Annual inflation dropped to 2.8%, from 3.8%, taking it back into the RBA's 2-3% target band for the first time since 2021, a result that was largely expected. 

The slowdown was driven by a 17.3% drop in electricity prices due to the government's subsidies, while petrol fell 6.2% in the quarter.

Policymakers are more focused on core inflation and the trimmed mean measure increased by 0.8% in the quarter, just above forecasts of a 0.7% gain. The annual pace though slowed to 3.5% from 4.0%.

Commonwealth Bank of Australia (OTC:CMWAY) on Wednesday abandoned its call for a first rate cut in December as the core measure was a touch firmer than it had expected. It is now pencilling in a cut in February next year, along with the other three big banks in Australia.

"The process of normalising the cash rate will be a story for 2025," said Gareth Aird, head of Australian economics at CBA.

Services inflation remains a source of concern for the RBA, staying elevated at 4.6% in the third quarter, slightly higher than the June quarter's 4.5%, and little changed over the past 12 months.

The central bank will have an updated set of economic forecasts when it decides on its next policy move on Tuesday.

The slow easing in inflation had Australian grocer Woolworths warning on Wednesday that earnings from its food division may fall as price-conscious consumers hunt for bargains.

POSITIVE IMPULSE

For September alone, CPI rose a muted 2.1% compared with a year earlier, the lowest since July 2021. The trimmed mean measure slowed to 3.2%, just a touch above the top of the target band.

The RBA has held its policy steady since November, judging the current cash rate of 4.35% - up from 0.1% during the pandemic - is restrictive enough to bring inflation to its target band of 2-3% while preserving employment gains.

The labour market has stayed surprisingly resilient, an argument against early rate cuts. But the easing in annual core inflation comes ahead of the RBA's projection for it to slow to 3.5% by the end of the year.

"Although quarterly trimmed mean CPI is not yet rising at pace consistent with the RBA’s target range, we think it will do so before long," Abhijit Surya, Australia and New Zealand Economist at Capital Economics.

By Jihoon Lee

SEOUL (Reuters) - South Korea's export growth is expected to have slowed for a third straight month in October on signs of cooling global demand for computer chips, a Reuters poll showed on Wednesday.

Outbound shipments from Asia's fourth-largest economy are forecast to have risen 6.9% in October from a year earlier, according to the median of 22 economists in the survey conducted Oct. 24-29.

That would be the 13th straight month of annual export growth but slightly weaker than the 7.5% year-on-year rise in September and the slowest rate since June.

"It is likely export growth has entered a slowing trend with IT demand beginning to gradually weaken amid limited demand for non-semiconductor exports," said Chun Kyu-yeon, an economist at Hana Securities.

South Korea, the first major exporting economy to report trade figures each month, is scheduled to report monthly data for October on Friday, Nov. 1, at 9 a.m. (0000 GMT).

Asia's fourth-largest economy barely grew in the third quarter due to a fall in exports, which had been led mainly by semiconductor sales to the United States.

"A slowdown in exports led by the semiconductor sector would be adverse news for the economic growth outlook if confirmed: semiconductor exports have largely been moving sideways in recent months," said Oh Suk-tae, an analyst at Societe Generale (OTC:SCGLY).

In the first 20 days of this month, exports fell 2.9%. Shipments to the United States and the European Union were down 2.6% and 8.9%, respectively, while those to China rose 1.2%.

"Growth in shipments to the United States, which has been robust, is seen slowing, while the recovery in China-bound shipments will be weaker than expectations," said Park Sang-hyun, an economist at iM Securities.

On the imports ledger, purchases are forecast to have risen 2.0% in October, after growing 2.2% in September.

The survey's median estimate of this month's trade balance came in at a surplus of $4.23 billion, compared with $6.66 billion in the prior month.

By Rae Wee

SINGAPORE (Reuters) - Asia shares eased on Wednesday on the back of weakness in China, as investors brace for a tightly contested U.S. election that could have huge ramifications for the world's second-largest economy, even as Beijing tries to shore up growth.

Gold rose to an all-time high as jitters over the close U.S. presidential race supported the yellow metal, while bitcoin also flirted with a record peak as markets weigh the prospect of a victory by Republican candidate Donald Trump.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.22% in early trade, tracking a decline in Chinese assets.

The CSI300 blue-chip index fell 0.16%, while Hong Kong's Hang Seng Index slid 0.64%.

The moves came even as Reuters reported on Tuesday that China is considering approving next week the issuance of more than 10 trillion yuan ($1.4 trillion) in extra debt in the next few years to revive its fragile economy.

"China's latest stimulus package appears underwhelming, with 60% allocated to local government debt relief," said Saxo's chief investment strategist Charu Chanana.

"While there's a stronger focus on supporting the property sector, urgency around broader structural issues - such as debt, deflation, and demographics - remains limited.

"Equity support could offer some lift to domestic confidence, but foreign investors are still highly concerned about potential tariff threats if next week's U.S. elections result in a Republican sweep."

China's new energy vehicles index ticked up 0.2%, largely unfazed by news that the European Union has decided to increase tariffs on Chinese-built electric vehicles to as much as 45.3%.

Meanwhile, U.S. stock futures ticked higher, buoyed by a solid result from Google-parent Alphabet (NASDAQ:GOOGL), which reported quarterly revenue that beat estimates.

Nasdaq futures gained 0.42%, while S&P 500 futures rose 0.36%.

Meta Platforms (NASDAQ:META) and Microsoft (NASDAQ:MSFT) report their earnings later in the day, followed by Apple (NASDAQ:AAPL) and Amazon.com (NASDAQ:AMZN) on Thursday. [.N]

Investors will be closely watching the results to determine whether Wall Street can sustain the optimism around technology and artificial intelligence that has lifted indexes to record highs this year.

Elsewhere, Japan's Nikkei rose nearly 1%, riding on the momentum of a weaker yen. (T)

U.S. FOCUS

Bitcoin stood just a whisker away from its peak of $73,803.25 and last bought $72,322.08, on track to gain 13% for the month.

The world's largest cryptocurrency has been bolstered by the growing possibility of Trump's return to the White House, as he is seen taking a more favourable stance towards digital assets.

"Bitcoin's strength should persist if the odds for a Republican sweep continue to grow, as a less likely Democratic sweep might meet a generalised sell-off," said Manuel Villegas, digital assets analyst at Julius Baer.

On the economic front, investors were also bracing for a slew of U.S. data this week that could guide the outlook for Fed policy.

The ADP National Employment Report is due later in the day alongside advance third quarter GDP estimates, which will come ahead of Friday's nonfarm payrolls figures.

Data on Tuesday showed U.S. job openings dropped to more than a 3-1/2-year low in September, though that was countered by a separate survey which showed consumer confidence increased to a nine-month high in October amid improved perceptions of the labour market.

"The U.S. data is still important for this week, there's no doubt about it," said Khoon Goh, head of Asia research at ANZ.

"We saw the JOLTS data out last night, it showed continued moderation of the labour market ... Today we have ADP, Q3 GDP, PCE deflator tomorrow and then payrolls Friday. So that will still be really important, particularly for the long-end yields and the impact on the dollar."

The dollar strayed not too far from a three-month high against a basket of currencies on Wednesday, though a stall in its recent rally gave sterling some respite above the $1.30 level.

The yen languished near a three-month low as it continued to feel the pressure from the loss of a parliamentary majority for Japan's ruling coalition in weekend elections.

The Aussie was little changed in the wake of domestic inflation data and last rose 0.15% to $0.6570.

In commodities, Brent crude futures ticked up 0.42% to $71.42 a barrel, while U.S. West Texas Intermediate crude futures rose 0.45% to $67.51 per barrel. [O/R]

Spot gold was last 0.18% higher at $2,779.81 an ounce, after having peaked at $2,781.69 earlier in the session. [GOL/]

By Philip Blenkinsop

BRUSSELS (Reuters) -The European Union has decided to increase tariffs on Chinese-built electric vehicles to as much as 45.3% at the end of its highest profile investigation that has divided Europe and prompted retaliation from Beijing.

Just over a year after launching its anti-subsidy probe, the European Commission will set out extra tariffs ranging from 7.8% for Tesla (NASDAQ:TSLA) to 35.3% for China's SAIC, on top of the EU's standard 10% car import duty.

The extra tariffs were formally approved and published in the EU's Official Journal on Tuesday, meaning they will take effect on Wednesday.

The Commission, which oversees EU trade policy, has said tariffs are required to counter what it says are unfair subsidies including preferential financing and grants as well as land, batteries and raw materials at below market prices.

It says China's spare production capacity of 3 million EVs per year is twice the size of the EU market. Given 100% tariffs in the United States and Canada, the most obvious outlet for those EVs is Europe.

The China Chamber of Commerce to the EU said it was profoundly disappointed by the "protectionist" and "arbitrary" EU measure and was disheartened by the lack of substantial progress in negotiations to find an alternative to tariffs.

Beijing launched its own probes this year into imports of EU brandy, dairy and pork products in apparent retaliation.

It has also challenged the EU's provisional measures at the World Trade Organization.

European automakers are grappling with an influx of lower-cost EVs from Chinese rivals. The Commission estimates Chinese brands' share of the EU market has risen to 8% from below 1% in 2019 and could reach 15% in 2025. It says prices are typically 20% below those of EU-made models.

The EU's stance towards Beijing has hardened in the last five years. It views China as a potential partner in some areas, but also as a competitor and a systemic rival, but EU members are not united on EV tariffs.

Germany, the EU's biggest economy and major car producer, opposed tariffs in a vote this month in which 10 EU members backed them, five voted against and 12 abstained.

Germany's economy ministry said on Tuesday that Berlin supported ongoing EU negotiations with China and hoped for a diplomatic resolution to mitigate trade tensions while protecting EU industry.

"The Federal Government stands for open markets. Because Germany in particular, as a globally interconnected economy, is dependent on this," the spokesperson added.

German carmakers have heavily criticised the EU measures, aware that possible higher Chinese import duties on large-engined gasoline vehicles would hit them hardest.

The measures come as thousands of German industrial workers, including at the carmakers, strike for higher wages, with Volkswagen (ETR:VOWG_p) possibly about to announce shutting plants on home soil for the first time in its 87-year history.

Hungarian Prime Minister Viktor Orban said the EU was headed for an "economic cold war" with China.

However, France's PFA car association has welcomed duties, adding it backed free trade as long as it was fair.

The Commission has held eight rounds of technical negotiations with China to find an alternative to tariffs and said talks can continue after tariffs are imposed.

The two sides are looking at possible minimum price commitments for imported cars and agreed on Friday to hold a further round, although the Commission said there were "significant remaining gaps".

It remains to be seen what impact tariffs will have on consumer prices. Some producers may be able to absorb them at least partially.

In the first nine months of 2024, China's EV exports to the EU were down 7% from a year earlier, but they have surged by more than a third in August and September, ahead of the tariffs, data from the China Passenger Car Association (CPCA) show.

Investing.com -- The Nasdaq closed at record highs Tuesday, shrugging off mixed economic data as tech continued to rack up gains ahead of major earnings.   

At 4:00 p.m. ET (2000 GMT), the Dow Jones Industrial Average dropped 154 points, or 0.4%, the S&P 500 index gained 0.2%, and the NASDAQ Composite jumped 0.7% to a record closing high of 18,717.58.

Tech rallies ahead of Alphabet earnings 

Big tech led the broader market higher just ahead of Alphabet's quarterly results due after the market closes. 

"We think Street estimates for 3Q advertising growth are achievable, but we see limited opportunity for upside relative to estimates this quarter given," Wedbush said in a recent note, flagging several concerns including slowing search growth and increased competition for the tech giant's Youtube business.  

Five of Wall Street’s “Magnificent Seven” are due to report earnings this week, with Google owner Alphabet (NASDAQ:GOOGL) set to report after the market close on Tuesday.

This will be followed by Meta Platforms (NASDAQ:META) and Microsoft (NASDAQ:MSFT) on Wednesday, while Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) will report on Thursday.

This week’s earnings are set to act as a bellwether for the broader market, given the relative market capitalization of the five tech giants. Investors will be watching to see whether Wall Street’s biggest firms were able to generate strong returns on their sizeable investments in artificial intelligence over the past year. 

“Putting it all together, risk flows over the last week, while positive, were rather subdued but kept net positioning for the S&P 500 net long and extended,” Citi strategists led by Chris Montagu said in a note.

Investing.com -- The Nasdaq closed at record highs Tuesday, shrugging off mixed economic data as tech continued to rack up gains ahead of major earnings.   

At 4:00 p.m. ET (2000 GMT), the Dow Jones Industrial Average dropped 154 points, or 0.4%, the S&P 500 index gained 0.2%, and the NASDAQ Composite jumped 0.7% to a record closing high of 18,717.58.

Tech rallies ahead of Alphabet earnings 

Big tech led the broader market higher just ahead of Alphabet's quarterly results due after the market closes. 

"We think Street estimates for 3Q advertising growth are achievable, but we see limited opportunity for upside relative to estimates this quarter given," Wedbush said in a recent note, flagging several concerns including slowing search growth and increased competition for the tech giant's Youtube business.  

Five of Wall Street’s “Magnificent Seven” are due to report earnings this week, with Google owner Alphabet (NASDAQ:GOOGL) set to report after the market close on Tuesday.

This will be followed by Meta Platforms (NASDAQ:META) and Microsoft (NASDAQ:MSFT) on Wednesday, while Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) will report on Thursday.

This week’s earnings are set to act as a bellwether for the broader market, given the relative market capitalization of the five tech giants. Investors will be watching to see whether Wall Street’s biggest firms were able to generate strong returns on their sizeable investments in artificial intelligence over the past year. 

“Putting it all together, risk flows over the last week, while positive, were rather subdued but kept net positioning for the S&P 500 net long and extended,” Citi strategists led by Chris Montagu said in a note.

Ford falls after cutting full-year profitability forecast 

Ford (NYSE:F) stock fell 8% after the automaker tempered its full-year profit forecast, blaming supplier disruptions and warranty costs amid a global price war fueled by overcapacity.

"Ford 3Q24 results showed continued pressure from some of the issues that have hit them for a while, namely higher warranty reared its head again (this time in Pro)," UBS said in a recent note.

Vans parent VF Corporation (NYSE:VFC) leapt 27% after the company reported a profit for the first time in two quarters.

DR Horton (NYSE:DHI) stock dropped 7% after the homebuilder forecast 2025 revenue below estimates, while McDonald’s (NYSE:MCD) stock was flat despite reporting a drop in global sales.

Labor market demand cools, but consumer confidence jumps 

Teh JOLTS job openings data, a measure of labor demand, for September unexpectedly fell, but the "pace of hiring picked up, lending some upside risk to our forecast for October payroll growth," Oxford Economics said on Tuesday. 

The quits rate, meanwhile, fell to its lowest level since the pandemic, which is consistent "with wage growth continuing to slow and easing the inflationary impulse from the labor market," it added.

Further clues into the labor market will continue to dominate attention with the release of the jobless claims and the ADP, or private payolls, report later this week, before the October jobs report due Friday.   

Consumer confidence, meanwhile, jumped to highest since 2021 despite uncertainty about the election outcome.

Ahead of the nonfarm payrolls report, however, inflation will also garner interest. September's US core personal consumption expenditures price index - the Fed's preferred measure of inflation - on Thursday,/

The readings come just weeks before a Fed meeting, where the central bank is widely expected to cut interest rates by a smaller 25 basis points.

The U.S. presidential elections are also set to take place in the coming week, with voting set for Nov. 5.

Republican nominee Donald Trump and Vice President Kamala Harris are set for a tight race, although recent polls and prediction markets have tended to favor Trump. 

(Peter Nurse, Ambar Warrick contributed to this article.)

Investing.com-- Gold prices rose in Asian trade on Tuesday, coming close to record highs as the run-up to the 2024 presidential election and uncertainty before upcoming data prints kept safe haven demand in play.

The yellow metal recouped all of its losses from the prior session, as easing fears of the Middle East conflict saw gold slip from recent peaks. 

But safe haven demand remained bolstered by expectations of a tight U.S. presidential race, while upcoming economic prints are also likely to factor into the outlook for interest rates. 

Spot gold rose 0.4% to $2,753.60 an ounce, while gold futures expiring in December rose 0.4% to $2,765.50 an ounce by 00:39 ET (04:39 GMT). 

Gold buoyed by election, rate jitters 

Donald Trump and Kamala Harris are set for a hotly-contested election, with voting set for November 5. 

Recent polls and prediction markets showed Trump gaining some ground over Harris, although analysts still forecast a tighter race. 

Uncertainty over the outcome, which will determine U.S. politics for the next four years, kept traders largely biased towards safe havens such as the dollar and gold.

Haven demand was also buoyed by anticipation of a string of key economic readings this week, which are likely to factor into the Federal Reserve’s plans for interest rates. 

Third-quarter gross domestic product data is due on Thursday. PCE price index data- the Fed’s preferred inflation gauge- and nonfarm payrolls data are due on Friday, with both prints coming just weeks before a Fed meeting. 

Gold and precious metal prices had persevered even as recent data prints furthered bets that the Fed will cut rates at a slower pace in the coming months. The central bank is expected to trim rates by 25 basis points in November.

Other precious metals rose on Tuesday. Platinum futures rose 1% to $1,054.00 an ounce, while silver futures rose 0.2% to $34.070 an ounce. 

Copper dips, China data awaited 

Among industrial metals, copper prices retreated as investors awaited more economic cues from China, the world’s biggest importer of the red metal.

Benchmark copper futures on the London Metal Exchange fell 0.5% to $9,510.0 a ton, while December copper futures fell 0.7% to $4.3362 a pound.

Copper was nursing steep losses through October as recent stimulus measures from Beijing failed to inspire confidence in an economic recovery.

Focus was now on purchasing managers index data from China, due on Thursday, for more cues on the economy.

HONG KONG (Reuters) - Hong Kong's home prices dropped for the fifth consecutive month in September, official data showed on Tuesday, in a struggling property market that realtors expect to bottom out soon after an interest rate cut and the government's easing policies.

WHY IT'S IMPORTANT

Housing demand in Hong Kong, one of the world's most unaffordable cities, has lost steam since May after a short-lived bounce when all property purchase curbs were lifted in February. Realtors said much of the pent-up demand has been sated, while property developers launched new flats at steep discounts to boost sales.

The government this month also relaxed the down payment ratio to 30% for all properties, and allowed purchases of luxury homes worth more than HK$50 million ($6.43 million) to be included in its investment immigration scheme.

BY THE NUMBERS

Private home prices fell 1.7% in September from the month before.

Prices have dropped 7.5% since December.

They have tumbled 27.7% from their 2021 peak, staying at their lowest level since August 2016, hurt by higher mortgage rates, an outflow of professionals and a weak market outlook.

MARKET COMMENTS

"We may see residential prices bottoming out in the near term after five months of decline," CBRE Hong Kong Executive Director Eddie Kwok said.

Knight Frank Senior Director Martin Wong expects prices to drop around 8% for the full year, as interest rates start to fall.

UBS expects home prices may rise up to 5% in 2025, driven by increased demand from mainland China and declining mortgage rates. The former British colony scrapped the extra stamp duty for foreign buyers in February.

CONTEXT

Hong Kong's major banks including HSBC and Bank of China (Hong Kong) surprised the market in September by cutting their best lending rate in the city by 25 basis points, following the U.S. Federal Reserve's interest rate cut.

Hong Kong's currency is pegged to the U.S. dollar, but local banks make their own rate decisions depending on their funding costs.

($1 = 7.7708 Hong Kong dollars)

Investing.com-- Oil prices rose in early Asian trade on Tuesday, recovering some ground after easing concerns over a worsening conflict in the Middle East sparked deep losses in the prior session.

Brent oil futures expiring in December rose 0.7% to $71.94 a barrel, while West Texas Intermediate crude futures rose 0.7% to $67.87 a barrel by 20:17 ET (00:17 GMT). 

Both contracts slid more than 6% on Monday after an Israeli strike against Iran over the weekend mostly avoided Tehran’s oil and nuclear infrastructure. 

The strike quashed fears of a dire escalation in the Middle East conflict, given that traders feared that any attacks on Iran’s energy infrastructure would draw a severe response from Tehran. 

This saw traders rapidly price down a risk premium from oil prices. 

Middle East tensions remain in focus as Iran touts retaliation

Fears of supply disruptions in the Middle East, due to a worsening conflict, had been a major driver of oil prices over the past month, especially after Iran attacked Israel at the beginning of October. 

Israel’s weekend strike was in retaliation for the early-October attack.

Tehran was seen downplaying the impact of the strike, but still threatened retaliation against Israel over the attack, keeping some elements of Middle East risks still in play.

Israel also showed little intent in scaling back its offensive against Hamas and Hezbollah, keeping hopes of a potential Middle East ceasefire limited. 

Oil markets brace for US elections, econ. data deluge 

Sentiment towards oil was also on edge before the U.S. presidential elections, which are less than a week away. The dollar surged in the run-up to the elections, pressuring oil markets as traders braced for a tight race between Donald Trump and Kamala Harris.

Recent polls and prediction markets showed Trump gaining some ground over Harris, with a Trump victory likely to herald inflationary policies in the coming months. 

A change in U.S. administration also heralds a shift in the country’s policies towards the Middle East. 

Before the election, focus is also on a slew of economic readings from major economies this week, which are expected to offer more cues on demand.

Purchasing managers index data from top oil importer China is due on Thursday, followed by gross domestic product data from the U.S. for the third quarter.

PCE price index data- the Federal Reserve’s preferred inflation gauge- is due on Friday, as is nonfarm payrolls data for October.

Investing.com-- U.S. stock index futures steadied in evening deals on Monday following a positive session on Wall Street, with focus turning squarely to a barrage of major earnings and economic readings this week. 

Wall Street was encouraged by hopes of easing tensions in the Middle East, after an attack by Israel against Iran was not as severe as markets were fearing. Positioning in technology stocks, before key earnings, also put the Nasdaq close to record highs. 

S&P 500 Futures steadied at 5,860.75 points, while Nasdaq 100 Futures were flat at 20,498.75 points by 19:05 ET (23:05 GMT). Dow Jones Futures were flat at 42,594.0 points. 

Alphabet to kick off big tech earnings this week

Five of Wall Street’s “Magnificent Seven” are due to report earnings this week, with Google owner Alphabet Inc (NASDAQ:GOOGL) set to report after the market close on Tuesday.

This will be followed by Meta Platforms Inc (NASDAQ:META) and Microsoft Corporation (NASDAQ:MSFT) on Wednesday, while Apple Inc (NASDAQ:AAPL) and Amazon.com Inc (NASDAQ:AMZN) will report on Thursday.

This week’s earnings are set to act as a bellwether for the broader market, given the relative market capitalization of the five tech giants. Investors will be watching to see whether Wall Street’s biggest firms were able to generate strong returns on their sizeable investments in artificial intelligence over the past year. 

Wall St steadies with econ. data, election in focus 

Wall Street indexes clocked mild gains on Monday, remaining in sight of record highs, although market volatility is set to increase in the coming days with a swathe of key economic readings, and the 2024 presidential election on tap.

The S&P 500 rose 0.3% to 5,823.52 points, while the NASDAQ Composite rose 0.3% to 18,568.05 points on Monday. The Dow Jones Industrial Average outperformed, rising nearly 0.7% to 42,387.57 points. 

A swathe of key economic readings are due this week, with gross domestic product data for the third quarter due on Thursday. 

This will be followed by PCE price index data- the Federal Reserve’s preferred inflation gauge- as well as nonfarm payrolls data- both due on Friday. 

The readings come just weeks before a Fed meeting, where the central bank is widely expected to cut interest rates by a smaller 25 basis points.

The U.S. presidential elections are also set to take place in the coming week, with voting set for November 5.

Republican nominee Donald Trump and Vice President Kamala Harris are set for a tight race, although recent polls and prediction markets showed Trump gaining some ground. 

By David Shepardson, Michael Martina and Trevor Hunnicutt

WASHINGTON (Reuters) - The Biden administration said on Monday it is finalizing rules that will limit U.S. investments in artificial intelligence and other technology sectors in China that could threaten U.S. national security.

The rules, which were proposed in June by the U.S. Treasury, were directed by an executive order signed by President Joe Biden in August 2023 covering three key sectors: semiconductors and microelectronics, quantum information technologies and certain AI systems.

The new rules are effective Jan. 2 and will be overseen by Treasury's newly created Office of Global Transactions.

Treasury said the "narrow set of technologies is core to the next generation of military, cybersecurity, surveillance, and intelligence applications."

The rule covers technologies like "cutting-edge code-breaking computer systems or next-generation fighter jets," added Paul Rosen, a senior Treasury official.

He added that "U.S. investments, including the intangible benefits like managerial assistance and access to investment and talent networks that often accompany such capital flows, must not be used to help countries of concern develop their military, intelligence, and cyber capabilities."

The rule is part of a broader push to prevent U.S. know-how from helping the Chinese to develop sophisticated technology and dominate global markets.

Commerce Secretary Gina Raimondo said earlier this year the rules were crucial to prevent China's developing military-related technologies.

The new rules contain a carve out allowing U.S. investment in publicly traded securities, but the officials said the U.S. already has authorities under previous executive order barring buying and selling of securities of certain designated Chinese companies.

The House select committee on China has criticized major American index providers for directing billions of dollars from U.S. investors into stocks of Chinese companies that the U.S. believes are facilitating the development of China’s military.