By Andrea Shalal and David Lawder

WASHINGTON (Reuters) -World Bank President Ajay Banga on Tuesday warned that a significant widening of the Israel-Gaza war could lead to major impacts on the global economy, calling the steep loss of civilian lives in the region "unconscionable."

Speaking in a Reuters NEXT Newsmaker interview, Banga said the war has had a relatively small impact on the global economy thus far, but a significant widening of the conflict would draw in other countries that are larger contributors to global growth, including commodity exporters.

"First of all, I think this unbelievable loss of life - women, children, others, civilians, is just unconscionable on all sides," Banga said. "The economic impact of this war, on the other hand, depends a great deal on how much this spreads."

"If it spreads regionally, then it becomes a completely different issue because now you start going into places that are far larger contributors to the world economy, both in terms of dollars, but also in terms of minerals and metals and oil and the like," he said.

Some Western countries are pushing for a ceasefire between Israel and Lebanon, as well as in Gaza, though the United States, Israel's strongest ally, has expressed its continued support and is sending it an anti-missile system and troops.

Israel launched the offensive against Hamas after the militant group's Oct. 7 attack on Israel, in which 1,200 people were killed and around 250 taken hostage to Gaza, by Israeli tallies. More than 42,000 Palestinians have been killed in the offensive so far, according to Gaza's health authorities.

Israeli strikes have also killed at least 2,350 people over the last year in Lebanon and left nearly 11,000 wounded, according to the Lebanese health ministry, and more than 1.2 million people have been displaced.

Banga said war damage from Israeli strikes on Gaza is now probably in the $14-20 billion range, and destruction from Israel's bombing of southern Lebanon will add to that regional total.

Banga said the World Bank had provided $300 million, six times what was normally given, to the Palestinian Authority to help it manage the crisis on the ground, but that was small compared to the "large number" it would ultimately need.

He said the multilateral development bank had also assembled a group of experts from Jordan, Israel, Palestine, Europe, the U.S. and Egypt to study what short- and longer-term actions it could take if a peace agreement could be reached.

"We're going to have to figure out how to have that publicly discussed and debated and then find the resources for it," he said, adding that the effort would require private and public resources.

By Ankur Banerjee

SINGAPORE (Reuters) - Asian equities fell on Wednesday after disappointing earnings from Europe's biggest tech firm ASML (AS:ASML) dragged chip stocks around the world, while expectations that the Federal Reserve will take a modest rate cut path propped up the dollar.

Also weighing on the market was lacklustre earnings from French luxury giant LVMH that showed demand in China for luxury goods worsened, denting some of the enthusiasm around China spurred by stimulus measures.

Tech-heavy South Korean stocks fell 0.6%, while chip stocks led Japan's Nikkei 1.8% lower. Taiwan stocks slipped 1.2%. That left MSCI's broadest index of Asia-Pacific shares outside Japan down 0.32%.

Matt Simpson, senior market analyst at City Index, said investors are likely questioning how exposed to risk they really want to be, given there are risk events and a U.S. election looming on Nov. 5.

"I expect investors to become increasingly twitchy as we head towards November 5th, and keen that book profits at frothy levels."

ASML, whose customers include AI chipmaker TSMC, logic chip makers Intel (NASDAQ:INTC) and Samsung (KS:005930) as well as memory chip specialists Micron (NASDAQ:MU) and SK Hynix, forecast lower than expected 2025 sales.

The Dutch chip equipment maker said despite a boom in AI-related chips, other parts of the semiconductor market are weaker for longer than expected, leading to customer cautiousness.

"The AMSL numbers were not good and suggest that all is not well in semiconductor chips outside of AI," said Nick Ferres, CIO at Vantage Point Asset Management in Singapore.

A Bloomberg News report that U.S. officials have been considering implementing a cap on export licenses for AI chips to specific countries also weighed on sentiment.

The dour mood meant Chinese stocks fell in early trading as investors awaited concrete details on stimulus plans. The blue-chip CSI300 index fell 0.6%, while Hong Kong's Hang Seng Index was 0.7% lower in early trading.

Investor focus is now on Thursday when China will hold a press conference to discuss promoting the "steady and healthy" development of the property sector.

"We believe investors should view the policy announcements since Sept. 24 as an integrated plan rather than isolated messages - the policy pivot looks very much here to stay," HSBC strategist Steven Sun said in a report.

RISING DOLLAR

On the macro side, investors remain enthralled by U.S. rates and the shifting rate cut expectations in the wake of data that has shown the U.S. economy to be resilient and inflation to tick just a bit higher.

That has kept traders on the fence of how deep the rate cuts will be in the near term, with traders pricing in 46 basis points (bps) of easing this year. The Fed started its easing cycle with an aggressive 50 bp cut in September.

Markets are ascribing a 96% chance of a 25 bp cut from the Fed next month, CME FedWatch tool showed, compared to a 50% chance a month earlier when investors were weighing towards another 50 bp cut from the U.S. central bank.

The dollar as a result has surged in recent weeks, with the U.S. dollar index, which measures the U.S. unit versus major rivals, at 103.24, hovering near its highest levels since early August.

The euro loitered around two month lows and last fetched $1.0887 in early trading ahead of the European Central Bank's policy meeting on Thursday, where the central bank is largely expected to cut rates again.

The yen was steady at 149.155 per dollar but is down 3.6% in October as the dovish tilt from the Bank of Japan drags the currency.

In commodities, oil prices were steady after steep declines in the previous session as investors contended with uncertainty around tensions in the Middle East and what it means for global supply. [O/R]

Brent crude oil futures rose 0.4% to $74.56 a barrel. U.S. West Texas Intermediate crude futures rose 0.5% to $70.93 per barrel.

By Jamie McGeever

(Reuters) - A look at the day ahead in Asian markets. 

Three monetary policy decisions dominate Asian markets on Wednesday, with investor sentiment and risk appetite likely to be kept in check by a selloff on Wall Street and worries over tech and the global economy the day before.

The central banks of Indonesia, Thailand and the Philippines all set interest rates on Wednesday, while the latest New Zealand inflation, South Korean unemployment and Japanese machinery orders are also on deck.

Oil prices are on the slide again, partly reflecting soft demand, particularly from China. Crude futures slumped nearly 5% on Tuesday, pushing U.S. crude below $70 a barrel and bringing the year-on-year decline back to 20%.

Tech worries pushed U.S. shares into the red, despite upbeat earnings from financial heavyweights Goldman Sachs, Citi and Bank of America. Nvidia (NASDAQ:NVDA) and ASML (AS:ASML) shares led the global tech slump, and attention later in the week turns to Taiwan Semiconductor Manufacturing Co, the contract manufacturer that produces Nvidia's processors.

It is expected to report a 40% leap in quarterly profit on Thursday, thanks to soaring demand.

On Wednesday, meanwhile, Bank Indonesia is expected to leave interest rates unchanged despite inflation falling to its lowest level since 2021, with the exchange rate at the forefront of policymakers' thinking.

Inflation is down to 1.84% and has been within BI's target of 1.5% to 3.5% all year, but the rupiah has fallen more than 3% from a September peak.

The Bank of Thailand is also expected to stay on hold and leave its one-day repo rate at 2.50% for the rest of the year. Four out of 28 economists in a Reuters poll predicted a quarter-point cut.

The Philippine central bank, on the other hand, is expected to cut its overnight borrowing rate by 25 basis points to 6.00%, and again in December as policymakers strive to support economic growth as inflation remains under control.

The central bank kicked off its easing cycle in August, and since then inflation has dropped below the bank's 2%-4% target.

Meanwhile, investors continue to digest the details and steer from China at the weekend about its stimulus measures, and the recent slew of data. None of that has been particularly encouraging and Chinese markets are drifting lower, although equities are still up substantially from 'pre-stimulus' levels.

Beijing on Tuesday announced that a press conference will be held on Thursday to discuss promoting the "steady and healthy" development of the property sector. If this announcement was aimed at reassuring investors, however, it has fallen flat.

Shanghai's blue chip index is down 13% from last Tuesday's peak, but is still up 20% from the day before Beijing first unveiled its measures to support markets, the property sector and growth.

Here are key developments that could provide more direction to markets on Wednesday:

- Indonesia, Thailand, Philippines rate decisions

- Bank of Japan's Seiji Adachi speaks

- New Zealand inflation (Q3)

MEXICO CITY (Reuters) -The International Monetary Fund on Tuesday said it sees Mexico's economic growth slowing to around 1.5% this year, citing capacity constraints and tight monetary policy.

Growth is seen slowing to 1.3% in Latin America's second-largest economy next year, the IMF said in a statement, when inflation is also expected to close in on the central bank's target of 3%.

Mexico's central bank, known as Banxico, lowered its benchmark interest rate to 10.50% in a split decision in September.

But minutes from the meeting showed that the board members expect easing inflation could allow for further rate cuts.

"Inflation risks remain on the upside," the IMF said, warning that weaker-than-expected economic growth in the United States, increased global risk aversion and unforeseen effects from recent reforms could weigh on Mexico's output.

When asked about the IMF projections, Mexico's new President Claudia Sheinbaum said the country's "economy is strong," adding that agricultural production is expected to grow next year.

The president also said that none of the proposed constitutional reforms pose a problem for investment in Mexico, despite the IMF's concerns.

The IMF said that a recent judicial overhaul creates "important uncertainties about the effectiveness of contract enforcement and the predictability of the rule of law."

Mexico's ruling party and allies pushed the reform through last month, arguing that it will reduce corruption in the judiciary by implementing the popular election of judges and magistrates.

But the reform has sparked concerns from major trade partners like the U.S. and Canada and protests from judges and magistrates.

TOKYO (Reuters) -Japanese Prime Minister Shigeru Ishiba said his government is aiming to compile a supplementary budget for the current fiscal year in excess of last year's 13.1 trillion yen ($87.6 billion) to fund an economic support package, the Nikkei business daily reported on Tuesday.

"Last year's supplementary budget was 13 trillion yen, and I would like to ask for a larger supplementary budget than that, and have it deliberated and passed by the parliament," Ishiba was quoted as saying on Tuesday during a stump speech as the campaigning for the lower house election kicks off.

Ishiba earlier this month formally instructed his ministers to draw up the measure to cushion the blow to households from rising living costs. The prime minister, who took the helm on Oct. 1, has stressed that his focus is to get the economy to fully shake off the growth-sapping deflation of the last three decades.

The fresh package will include payouts to low-income households and subsidies to local governments.

($1 = 149.6200 yen)

ISTANBUL (Reuters) -Turkey's economy will grow 3% this year and next, lower than the government's recently updated forecasts, a Reuters poll of economists showed on Monday, pointing to a much deeper slowdown as authorities seek to douse rampant inflation.

Poll respondents also unanimously agreed the central bank would hold its key interest rate at 50% on Thursday, but eventually ease policy by 250 basis points by year-end.

Ankara launched its tightening drive in mid-2023 to reverse a years-long low-rates strategy championed by President Tayyip Erdogan to boost economic growth.

The central bank has since raised rates by 4,150 basis points, while the government adopted tax and savings measures meant to rebalance the economy and leave behind a series of currency crisis and price rises.

The drive to cool prices is expected to lower gross domestic product growth to average 3% this year and next, according to the median of 42 economists in the Oct. 8-14 Reuters poll.

That compares to the government's prediction of 3.5% GDP growth this year and 4% next year, in its three-year policy roadmap. The economy grew 4.5% in 2023. 

GDP will rise 3.6% in 2026, the poll's median showed. 

Natixis said the government had kept its promise of orthodox economic policies and announced fiscal consolidation and budget measures that had further squeezed growth and helped the central bank tackle inflation. 

"The impact from a much tighter policy mix on economic activity is, indeed, seen via a number of indicators ... Recession is not yet on the table though as we anticipate a slowdown in the real GDP growth," the investment management firm said. 

The central bank will announce its interest rate decision at 1100 GMT on Oct. 17.

In the poll, economists predicted it would not significantly ease policy until next year. The bank was forecast to have reduced rates by 20 percentage points to 30% by end-2025.

Economists expect the policy rate to fall to 42.5% in the first quarter of next year and to 35.0% in the second quarter, based on the median response. They expect the cutting cycle to be completed in the third quarter of next year, leaving the policy rate at 30.0%.

Tight policy, fiscal measures and base effects brought inflation down to 49.38% in September from a recent peak of 75.45% in May. 

The poll median showed economists expect inflation to fall to 43.5% this year and to 25.2% by the end of 2025. The government forecasts annual inflation will fall to 41.5% in 2024 and 17.5% next year.

Turkey's current account deficit in 2024 is expected to be 1.8% of GDP this year and next, the median forecast showed, compared to a government forecast of 1.7% and 2.0% respectively.

(Other stories from the October Reuters global economic poll)

(Polling by Indradip Ghosh and Mumal Rathore; Writing by Ezgi Erkoyun; Editing by Jonathan Spicer and Alison Williams)

By Stella Qiu

SYDNEY (Reuters) - Asian stocks were mostly higher on Tuesday, supported by a strong Wall Street close and investor optimism about corporate earnings, while the dollar held near a two-month top, aided by bets on a smaller U.S. rate cut next month.

Oil prices are down about 3% after Israeli Prime Minister Benjamin Netanyahu reportedly told the United States that Israel is willing to strike Iranian military targets and not nuclear or oil ones, easing immediate concerns about supply disruptions. [O/R]

The Nikkei rallied 1% to a three-week peak, having been closed on Monday for a holiday. MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.2% as gains in Taiwan and Australia were partly offset by a drop in Chinese markets.

China's blue chips fell 0.4%, while Hong Kong's Hang Seng index slipped 0.3% as a lack of new stimulus details from Beijing left investors wanting for more.

Local media reported that Beijing may raise an additional 6 trillion yuan ($850 billion) from Treasury bonds over three years to help bolster a sagging economy.

"China's signal on policy stimulus prompted us to go modestly overweight, especially given depressed valuations. Details have been scant, so we could change our view if future announcements disappoint," said analysts at BlackRock (NYSE:BLK) Investment Institute.

"We still like U.S. stocks and the broad AI theme as corporate earnings growth expands beyond tech. Yet fears over stretched valuations can drive brief selloffs. This calls for considering global exposure where we see cheap valuations and potential catalysts."

Overnight, the S&P 500 and Dow roared to record high closes, led by chip stocks after a 2.4% jump in AI darling Nvidia (NASDAQ:NVDA) and a brisk start to the third-quarter earnings season with beats by JP Morgan and Wells Fargo.

Other big banks including Citi, Bank of America and Goldman Sachs will report quarterly results on Tuesday.

In the foreign exchange market, the dollar slipped 0.2% to 149.50 yen, pulling back from a 2-1/2-month high of 149.98 overnight. The euro held at $1.0906, up off the 10-week trough overnight, ahead of a rate decision from the European Central Bank on Thursday.

The dollar has been buoyed by conviction the Federal Reserve will choose a smaller 25 basis point rate cut next month, rather than a 50 bp move, given the economy continues to grow without overheating.

Fed Governor Christopher Waller on Monday called for "more caution" on interest-rate cuts ahead, while Fed Minneapolis President Neel Kashkari sees more modest rate cuts ahead.

Traders are pricing in about an 88% probability the Fed will cut rates by 25 basis points next month and a 12% chance it would leave rates unchanged, according to CME's FedWatch.

The U.S. bond market was shut for a holiday on Monday, but cash Treasuries fell slightly in early Asia trade. Two-year Treasury yields are up 1 basis point to 3.9533%, while 10-year yields climbed 2 bps to 4.0885%.

Oil extended its declines for a third straight session on demand concerns and as the jitters about Israel's attack on Iran calmed. Brent futures fell 2.9% to $75.22 a barrel, having dropped 2% overnight.

Gold was 0.1% lower at $2,648.57 an ounce.

By Ankur Banerjee

SINGAPORE (Reuters) - The U.S. dollar was perched at an over two-month high against major currencies on Tuesday, spurred by wagers the Federal Reserve will proceed with modest rate cuts in the near term, while the yen inched closer to the key 150 per dollar level.

The euro was steady in early Asian hours but close to its lowest level since Aug. 8 that it touched on Monday ahead of the European Central Bank policy meeting on Thursday, where the central bank looks set to deliver another interest rate cut.

A string of U.S. data has shown the economy to be resilient and slowing only modestly, while inflation in September rose slightly more than expected, leading traders to trim bets on large rate cuts from the Fed.

The U.S. central bank kicked off its easing cycle with an aggressive 50 basis points at its last policy meeting in September. Traders are now ascribing 89% chance of a 25 bps cut in November, with 45 bps of easing priced in for the year.

The dollar index, which measures the U.S. currency against six rivals, was last at 103.18, just shy of 103.36, the highest level since Aug. 8 it touched on Monday. The index is up 2.5% and on course to snap its three-month losing streak.

The dollar got a lift after Fed Governor Christopher Waller on Monday called for "more caution" on interest rate cuts ahead, citing recent economic data.

"Whatever happens in the near term, my baseline still calls for reducing the policy rate gradually over the next year," Waller said.

Recent hurricanes and a strike at Boeing (NYSE:BA) could make job market readings difficult, stripping perhaps more than 100,000 from monthly job gains in October, Waller estimated. The next non-farm payrolls (NFP) data is due in early November.

"Most knew that recent disruptions would result in the NFP print being a messy affair, but Waller's comment goes some way in quantifying the sort of disruption we can expect," said Chris Weston, head of research at Pepperstone.

"Essentially, with the next NFP so distorted, the market won't have the same level of control in pricing risk into the November FOMC meeting."

The dollar's rise in the past few weeks has pushed the yen lower, especially after a dovish shift in rhetoric from Bank of Japan Governor Kazuo Ueda and surprising opposition to further rate hikes by new Prime Minister Shigeru Ishiba.

That has cast doubts over when Japan's central bank will next tighten policy.

The yen last fetched 149.55 per dollar in early trading, having touched a 2-1/2 month high of 149.98 on Monday when Japan was closed for a holiday. It last hit the 150 level on Aug. 1.

Meanwhile, the Australian dollar was steady at $0.67275, while the New Zealand dollar was 0.13% lower at $0.6089. The euro last bought $1.090825.

China's offshore yuan was little changed at 7.0935 per dollar after Caixin Global reported China may raise an additional 6 trillion yuan ($850 billion) from Treasury bonds over three years to help bolster a sagging economy through added fiscal stimulus.

Tony Sycamore, market analyst at IG, said the market now appears to be taking the view that fresh stimulus measures are on the horizon, possibly at the China National People's Congress standing committee meeting later this month.

By Libby George

LONDON (Reuters) - Countries are likely to default more frequently on their foreign currency debt in the coming decade than they did in the past due to higher debt and an increase in borrowing costs, agency S&P Global Ratings warned in a report on Monday. 

Sovereigns' credit ratings overall have also weakened globally in the past decade.

The report's findings are a stark warning as the world exits a punishing round of sovereign debt defaults - even as wealthy creditor nations said earlier this year that the risk of debt crisis that has weighed on the world was beginning to recede.

"These factors quickly create liquidity challenges as access to financing dries up and capital flight accelerates," the report said. "In many cases, this constitutes the tipping point where liquidity and solvency constraints become problematic for a government."

The COVID-19 pandemic in 2020 strained state finances, and there were seven instances of countries defaulting on their foreign currency debt - Belize, Zambia, Ecuador, Argentina, Lebanon and Suriname twice. 

A spike in food and fuel prices after Russia's February 2022 invasion of Ukraine piled on more pressure, and eight more countries defaulted in 2022 and 2023, including both Ukraine and Russia. 

The combined number of defaults since 2020 amounts to more than a third of the 45 sovereign foreign currency defaults since 2000.

S&P Global Ratings analysed defaults over the past two decades and found that developing countries are now relying more heavily on government borrowing to ensure foreign capital inflows. But when that reliance was paired with unpredictable policies, a lack of central bank independence and shallow local capital markets, trouble repaying often followed. 

Higher government debt and fiscal imbalances prompted capital flight, which in turn intensified balance-of-payment pressures, depleted foreign exchange reserves and eventually cut off their ability to borrow - essentially a doom spiral that led to default.

It also warned that debt restructurings are taking significantly longer now than in the 1980s - with big consequences.

"We also found that the long-term macroeconomic consequences are more severe for sovereigns that remain in default for multiple years, increasing the probability of further defaults down the line," it said. 

Interest payments in soon-to-default countries tended to approach or even exceed 20% of government revenue in the year before default, and the countries also typically entered recession, while inflation rose to double digits, making life tougher for people there.

"Sovereign defaults have significant implications for economic growth, inflation, exchange rates, and the solvency of a sovereign's financial sector," the report said.

(This story has been corrected to fix the dateline to Oct. 14, not Oct. 7)

By David Shepardson

WASHINGTON (Reuters) -The Federal Aviation Administration approved a license on Saturday for the launch of SpaceX's Starship 5 set for Sunday after earlier saying it did not expect to make a decision until late November.

Reuters first reported this week the faster than expected timetable after the FAA in September had suggested a much longer review.

SpaceX is targeting Sunday for the launch and said a 30-minute launch window opens at 7:00 a.m. CT (1200 GMT)

The FAA said on Saturday SpaceX had "met all safety, environmental and other licensing requirements for the suborbital test flight" for the fifth test of the Starship and has also approved the Starship 6 mission profile.

The Starship spacecraft and Super Heavy rocket are a fully reusable system designed to carry crew and cargo to Earth orbit, the Moon and beyond.

The fifth test flight of the Starship/Super Heavy from Boca Chica, Texas, includes a return to the launch site of the Super Heavy booster rocket for a catch attempt by the launch tower, and a water landing of the Starship vehicle in the Indian Ocean west of Australia.

The FAA said if SpaceX chooses an uncontrolled entry "it must communicate that decision to the FAA prior to launch, the loss of the Starship vehicle will be considered a planned event, and a mishap investigation will not be required."

On Friday, the FAA approved the return to flight of the SpaceX Falcon 9 vehicle after it reviewed and accepted the SpaceX-led investigation findings and corrective actions for the mishap that occurred Sept. 28.

SpaceX CEO Elon Musk has harshly criticized the FAA, including for proposing a $633,000 fine against SpaceX over launch issues and for the delay in approving the license for Starship 5, which the company says has been ready to launch since August. Musk has called for the resignation of FAA Administrator Mike Whitaker and threatened to sue the agency.