By Michael S. Derby and Dan Burns

WASHINGTON (Reuters) - The Federal Reserve appears to be very much on track for an interest rate cut in September after a "vast majority" of officials said such an action was likely, according to the minutes of the U.S. central bank's July 30-31 meeting.

The minutes, which were released on Wednesday, even showed some policymakers would have been willing to reduce borrowing costs at last month's gathering.

The policy-setting Federal Open Market Committee left its benchmark interest rate unchanged in the 5.25%-5.50% range on July 31, but opened the door to a cut at the Sept. 17-18 meeting.

Financial markets have been expecting the September meeting to kick off the Fed's policy easing, with as much as a full percentage point worth of rate cuts expected by the end of this year.

At the July meeting, most policymakers thought that "if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting," the minutes said.

They also noted "many" Fed officials viewed the stance of rates to be restrictive and "a few participants" contended that amid an ongoing cooling in inflationary pressures, no change in rates would mean that monetary policy would increase the drag on economic activity.

While all Fed officials were on board with keeping rates steady in July, the minutes revealed that "several" policymakers said progress in lowering inflation amid a rise in joblessness "had provided a plausible case" for a quarter-percentage-point cut in July, "or that they could have supported such a decision" had it been on the table.

The minutes also showed that a dwindling camp of policymakers feared a premature easing in monetary policy could restart inflation.

Jamie Cox, managing partner at Harris Financial Group, said "the Fed minutes removed all doubt about a September rate cut." He added that "the Fed's communication strategy is to make its meetings less of a market-moving event, and they are following the script to the letter."

With the Fed letting the data determine what happens with rates, central bank watchers are already contemplating the future scope of cuts and whether aggressive action is needed at the onset of the easing cycle.

"It may not be too heavy a lift for (Fed) Chair (Jerome) Powell to move the Committee now to a baseline of three 25-basis-point cuts in a row" through the end of the year, analysts at Evercore ISI said. They added that there's a "reasonably low bar" for half-percentage-point cuts, but that would likely require a "more pronounced weakening" in the job market relative to the softness seen in hiring data in July.

BALANCE OF RISKS

The case for cutting rates rests on the ebbing of price pressures back to the central bank's 2% target and increased anxiety about the state of the job market in the wake of recent data showing a rise in the unemployment rate.

The speed of the jump in the jobless rate, which bottomed at 3.4% early last year and has since climbed to 4.3% as of last month, has added urgency to the debate over rate cuts and has prompted some analysts to say that a half-percentage-point reduction in borrowing costs should be considered next month.

The minutes noted that officials see the job market as having largely returned to where it was before the COVID-19 pandemic started, and described the job market as "strong but not overheated."

Markets showed little reaction to the release of the minutes, with stocks rising modestly to end the day higher and bond yields falling. Fed funds futures showed the probability of a quarter-percentage-point cut at the September meeting falling slightly from Tuesday and the odds of a half-percentage-point reduction edging higher.

Powell largely tipped off the likely outlook after the July policy meeting when he said "if we do get the data that we ... hope we get, then a reduction in our policy rate could be on the table at the September meeting."

The Fed's concerns about the job market may be underpinned by the Labor Department's estimate on Wednesday that 818,000 fewer payroll jobs existed in March than previously reported. The change was part of the annual benchmark revision process.

Those revisions may not have caught Fed officials off guard, with the minutes noting "reported payroll gains might be overstated," which means the economy might not need to add as many new positions each month to keep the jobless rate steady.

The minutes also noted that a "majority" of Fed officials saw risks to the job market as having increased while risks to the inflation mandate had been reduced.

The current level of joblessness is already higher than the 4% level Fed officials penciled in for this year in their updated economic projections in June, and the 4.2% policymakers projected for the end of next year.

Markets are likely to get an update of Powell's views on Friday when he speaks at the Kansas City Fed's annual research conference in Jackson Hole, Wyoming. A number of other Fed officials are also likely to weigh in on the outlook while attending the conference.

Another major point for the monetary policy outlook comes in early September with the U.S. Labor Department's release of the employment report for August.

BEIJING (Reuters) -China has opened an anti-subsidy investigation into imported dairy products from the European Union, a step that appears mainly aimed at Ireland and in response to the bloc's curbs on its electric vehicle exports.

The investigation announced by China's commerce ministry on Wednesday will focus on various types of cheeses, milks and creams intended for human consumption.

The probe began on August 21.

It was prompted by a complaint submitted by the Dairy Association of China and the China Dairy Industry Association on July 29 on behalf of the domestic dairy industry, the ministry said.

China will examine 20 subsidy schemes from across the 27-strong bloc, specifically those from Austria, Belgium, Croatia, Czech Republic, Finland, Italy, Ireland, and Romania, it said in a statement.

Of the countries listed, Ireland is by far the biggest exporter of dairy products to China, having sold $461 million worth of goods to the Asian nation last year.

The EU on Tuesday revised its proposed punitive duties on imports of Chinese-made electric vehicles, but fell short of abandoning them, as Beijing had called on Brussels to do.

BANGKOK (Reuters) - Thailand's economy is nearly in crisis due to declining exports and uncompetitive manufacturing, the country's caretaker finance minister said on Wednesday.

Exports accounts for 70% of the economy but the manufacturing sector can't meet market demand, Pichai Chunhavajira told a business seminar.

"We can't compete. We can't adapt in time," he said.

Southeast Asia's second-largest economy grew 2.3% in the April-June quarter from a year earlier, accelerating from the 1.6% growth in the prior quarter.

But quarter-on-quarter growth slowed to 0.8% in the second quarter from the 1.2% expansion in the previous three months.

The finance ministry predicts economic growth of 2.7% for 2024, after last year's growth of 1.9%, which lagged regional peers.

The central bank is widely expected to leave its key interest rate unchanged at a more than decade-high of 2.50% for a fifth straight meeting later on Wednesday.

By Tom Westbrook

SINGAPORE (Reuters) - Asian shares slipped on Wednesday as a stellar rebound in world stocks paused for breath, while bond yields and the dollar fell ahead of U.S. economic data and speeches from policymakers that are expected to make the case for interest rate cuts.

The S&P 500 snapped eight sessions of gains with a 0.2% overnight drop. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.6%.

Hong Kong's Hang Seng slumped 1.4% with JD (NASDAQ:JD).com dropping 11% after Bloomberg News reported top shareholder Walmart (NYSE:WMT) plans on selling its large stake.

Japan's Nikkei fell 1% at the open as a recovery from its collapse in early August runs into resistance around the 38,000 level, and more gains in the yen dented sentiment.

"The sell-off itself has largely corrected, and the recession scare has given way to soft landing hopes again," said Bank of Singapore analyst Moh Siong Sim.

"But now we are back to square one and ... the market needs validation before it can be more relaxed, and that validation must come from data."

Later on Wednesday preliminary revisions to U.S. labour data are due to be published and a large downward revision is expected, which would support cutting interest rates. On Thursday, U.S. and global purchasing managers' index surveys are due.

The falling dollar has launched gold to record highs and returned the yen to 145.48 per greenback, a gain of 1.6% for the week so far and some 11% higher than last month's 38-year trough.

The euro is up nearly 3% for August to date and, at $1.1130 in morning trade, is at its highest since early December and testing major chart levels. [FRX/]

Interest rate futures have priced a 25 basis point U.S. rate cut next month, with a 1/3 chance of a 50 bp cut. Almost 100 bps in cuts are priced this year, and another 100 bps next year.

"It is likely that the current softer tone of the greenback stems mostly from expectations that easier Fed policy is increasingly imminent," Rabobank strategist Jane Foley said in a note.

"This raises the question as to whether Fed rate cut hopes are still overdone and the risk of near-term (euro/dollar) dips back below $1.10."

Federal Reserve Chair Jerome Powell is due to make a speech at the Jackson Hole symposium in Wyoming on Friday. The Australian and New Zealand dollars held sizeable recent gains with the Aussie at $0.6747 and kiwi at $0.6157. [AUD/]

The mood kept bond markets supported and 10-year U.S. Treasury yields nudged lower to 3.81%, while two-year yields hovered at 3.9962%.

Commodity prices stabilised with Brent crude futures at $77.17 a barrel and Dalian iron ore finding a floor after a Bloomberg report that China plans to allow local governments to buy unsold homes in the latest property-market support measure.

China is the world's biggest steel consumer and markets are sensitive to any signs that construction could get back on track. Big miners' shares were steady in Australia.

Gold prices hovered at $2,516 an ounce, just below record levels touched on Tuesday.

In emerging markets, central banks in Thailand and Indonesia meet to set rates on Wednesday, though neither is expected to start cutting rates before the Federal Reserve.

By Kevin Buckland

TOKYO (Reuters) - The dollar slipped to its lowest this year versus the euro on Wednesday as traders braced for potentially crucial revisions to U.S. payrolls data later in the day, ahead of a speech by Federal Reserve Chair Jerome Powell at the end of the week.

The U.S. currency also dipped below the closely watched 145 yen level and hovered close to the more-than-one-year low to sterling reached overnight. Pressure notably came from U.S. bond yields, which hit their lowest since Aug. 5, when yields crashed to the a more-than-one-year trough after surprisingly soft monthly jobs figures sparked recession fear.

"The reduced yield premium in the U.S. Treasury market has been a clear factor driving the USD lower," said Chris Weston, head of research at Pepperstone.

"As we can see in so many USD pairs of late, the USD just can't find a friend in the market and is in free fall."

A weak monthly payrolls report at the start of the month was a catalyst for a spike in volatility across asset classes, leaving market participants bracing for another potential shock with revised data due later Wednesday.

The Aug. 2 payrolls report sent traders racing to price in prospects of the Fed needing to slash interest rates by a half percentage point at its mid-September policy meeting, pushing the implied probability of such a move to about 71%, according to CME Group's (NASDAQ:CME) FedWatch Tool.

However, a run of better macroeconomic data has since seen the odds flip, with bets now 72% for a quarter-point cut and 28% for the bigger reduction.

Powell's keynote address on Friday at the Kansas City Fed's Jackson Hole economic symposium will be parsed carefully for any hints on the likely size of a rate cut next month, and whether borrowing costs are likely to be lowered at each subsequent Fed meeting.

The U.S. dollar index - which measures the currency against the euro, sterling, yen and three other major rivals - edged to a fresh low since Jan. 2 at 101.34 as of 0026 GMT, after dropping 0.5% or more in each of the previous three sessions.

The euro pushed to $1.1131, the highest since Dec. 28.

Sterling stood at $1.3033 after touching a high of $1.3054 on Tuesday, a level last seen in July of last year.

Against Japan's currency, the dollar sagged 0.2% to 144.98 yen, after earlier dipping to 144.945, dropping below the psychological 145 barrier for the first time since Aug. 6.

Traders will have a close eye on a special session of Japan's parliament on Friday, when politicians will scrutinise the Bank of Japan's unexpected decision to raise interest rates last month and the central bank's sudden hawkish turn.

BOJ Governor Kazuo Ueda will testify and focus will be on his tone after his influential deputy Shinichi Uchida adopted a more dovish stance earlier this month, helping calm markets.

Australia's dollar hovered just below the one-month high of $0.6749 from Tuesday. New Zealand's dollar edged up to $0.61585, marking a fresh high since July 8.

By Noel Randewich

(Reuters) - The S&P 500 will trade near current record levels at year-end, according to a Reuters poll of market strategists that suggests the AI rally is losing steam as investors wait for a widely-expected U.S. central bank interest rate cut next month.

The benchmark S&P 500 will end 2024 at 5,600 points, according to the median forecast of 41 equity strategists, analysts, brokers and portfolio managers collected Aug. 8-20. The index closed at 5,608 on Monday.

In a May poll, market strategists expected the S&P 500 to trade nearly unchanged for the rest of the year but the index has climbed over 5% since then.

Overall, the S&P 500 has surged around 17% so far in 2024, backed by sharp gains in Nvidia (NASDAQ:NVDA), Microsoft (NASDAQ:MSFT) and other Wall Street heavyweights as they race to dominate emerging AI technology.

The U.S. stock market has turned volatile in recent weeks, partly on recession fears, but also related to the unwinding of large leveraged positions in markets as a result of a sudden, sharp rise in the Japanese yen, used as a funding currency.

Fading recession concerns helped boost stocks last week, marking their biggest weekly gains since November.

Investors have also become nervous about massive spending by Google-parent Alphabet (NASDAQ:GOOGL), Microsoft and Meta Platforms (NASDAQ:META) to build their AI infrastructure.

"The AI sugar high is fading and the market is coming to grips with a possible slowdown in GDP," said Synovus (NYSE:SNV) Trust portfolio manager Daniel Morgan, warning as well of "little room for error" due to stretched valuations.

The S&P 500 dipped 0.2% on Tuesday ahead of an annual central banking conference at Jackson Hole, Wyoming later this week that could offer clues about the trajectory of interest rate cuts. The index is down about 1% from its record high close on July 16.

Nvidia's stock has surged 158% in 2024, and analysts expect the chipmaker's quarterly net income to more than double when it reports its results next week, according to LSEG.

The S&P 500 will trade at 5,900 points by the end of next year, a 5.2% gain from Monday's close, the survey showed.

Stock strategists struggle to accurately predict the market, but their forecasts offer a glimpse of sentiment across Wall Street and Reuters poll medians often correctly predict the direction of trading.

A neck-and-neck race between former President Donald Trump and Vice President Kamala Harris means additional uncertainty for investors ahead of the Nov. 5 U.S. presidential election.

As well, turmoil in the Middle East and uncertainty over how many interest rate cuts the Fed will deliver make it particularly difficult right now to forecast the stock market, said Chase Investment Counsel President Peter Tuz.

Money market traders mostly expect a 25 basis point rate cut at the Fed's September policy meeting, with a total of at least 75 basis points in reductions by year end, according to CME Group's (NASDAQ:CME) FedWatch.

Asked by Reuters, over half of poll respondents said a stock market correction of at least 10% is likely by the end of September. More than half predicted corporate earnings would beat expectations through the end of 2024.

While the AI rally has benefited the U.S. stock market's most valuable companies, much of the market has lagged.

The median S&P 500 stock has gained around 9% this year, while the S&P 500 consumer discretionary, real estate and materials sector indexes have languished with year-to-date gains of about 5% each.

Following this year's rally, the S&P 500 is trading at 21 times expected earnings, compared to a 10-year average of 18, according to LSEG.

Goldman Sachs lowered the odds of a U.S. recession in the next 12 months to 20% from 25% following recent upbeat jobless claims and retail sales reports.

(Other stories from the Reuters Q3 global stock markets poll package)

Investing.com -- A luxury yacht carrying a group of individuals, including Morgan Stanley International Chairman Jonathan Bloomer and British tech entrepreneur Mike Lynch, sank off the coast of Sicily early Monday, as per a Reuters report. 

The "Bayesian," a luxury yacht owned by Angela Bacares, sank near the Sicilian port of Porticello during a severe storm. Of the 22 people on board, 15 were rescued, including a one-year-old child.

Tragically, one person died, and six, including yacht owner Bacares' husband, British tech entrepreneur Mike Lynch, and Morgan Stanley Chairman Jonathan Bloomer, remain missing. Lynch's 18-year-old daughter is also among the unaccounted for, the report added. 

Also reported missing are Chris Morvillo, a lawyer at Clifford Chance, and several others of British, American, and Canadian nationality. Eyewitnesses described the yacht vanishing quickly beneath the waves just before dawn. 

The report mentioned that the Italian coast guard confirmed the missing individuals were on a trip organized by Lynch for his work colleagues. The captain of a nearby boat described turning on his engine to avoid colliding with the Bayesian as the storm intensified. After the weather subsided, the yacht was nowhere to be found.

By Veronica Dudei Maia Khongwir

BENGALURU (Reuters) - The Bank of Korea will keep its key interest rate at 3.50% on Thursday and cut it next quarter after the U.S. Federal Reserve likely begins easing in September, according to a Reuters poll.

The benchmark rate has been at 3.50% since January 2023. With inflation rising 2.6% in July from an 11-month low of 2.4% in June, moving further away from the central bank's 2% target, the BOK may need to see prices stabilising before it starts to ease policy.

The Korean won, which has lost over 3% against the dollar this year and is one of the worst-performing emerging market currencies in 2024, was also likely to prevent the BOK from leapfrogging the U.S. Federal Reserve's first rate cut, which is widely expected to come in September.

A strong majority of economists, 38 of 40, in the Aug. 13-19 poll forecast the central bank would keep its base rate unchanged at 3.50% on Aug. 22. The remaining two predicted a 25 basis point cut to 3.25%.

Although two board members said in July they were open to rate cuts, economists cautioned such a move could exacerbate house price increases in Seoul, heightening concerns in a country with one of the world's highest household debt-to-GDP ratios, at 104.3% in the first quarter.

"The BoK will continue to signal a more dovish stance, albeit cautiously, given persistent concerns about rising home prices and the associated financial stability risks," wrote Krystal Tan, economist at ANZ Bank.

"Our base case is still for the BoK to kick off its rate easing cycle in October, following a likely Fed pivot in September. The government is also set to tighten debt service ratio regulations from September, which should help contain growth in household debt."

Median forecasts showed no change to interest rates this quarter but predicted a 25 basis point cut to 3.25% in the October-December quarter. This outlook was largely unchanged from a July survey.

Among economists who provided an outlook until the end of 2024, 27 forecast the rate would be at 3.25%, while eight predicted 3.00%.

"We think the BOK will cut rates in October, with inflation higher than expected there is no urgency... to cut as soon as August. Also, house prices in Korea (are) actually quite high at the moment," said Kelvin Lam, senior economist at Pantheon Macroeconomics.

The BOK has cited growth in household debt and rising home prices as key factors it is monitoring before opening the door to rate cuts. House price increases accelerated in July, with prices in Seoul increasing the most in over four years.

Going into next year, the BOK was expected to cut rates by an additional 75 basis points, bringing its interest rate to 2.50% by the end of 2025, the poll showed.

By Daksh Grover

(Reuters) - Gold held steady near its record high on Tuesday as investors awaited U.S. Federal Reserve minutes and Chair Jerome Powell's speech for indications on how much the central bank will cut rates this year.

Spot gold edged 0.2% higher to $2,500.08 per ounce by 0254 GMT, trading slightly below an all-time high of $2,509.65 hit on Friday. U.S. gold futures rose 0.1% to $2,537.70.

"Gold prices have been largely steady in the Asian session, seemingly catching a breather as buyers seek to defend its new record high," said IG market strategist Yeap Jun Rong.

"The broader upward trend for gold remains intact, which could see prices eye for a move towards the $2,665 level from a technical perspective."

Gold prices have rallied more than 20% so far this year on optimism that the Fed will begin cutting interest rates in September, robust central bank buying and safe-haven demand stemming from the Middle East tensions.

Non-yielding bullion's appeal tends to shine in a low interest rate environment. The Fed is expected to cut rates by 25 basis points at each of the three remaining meetings of 2024, with a slim majority of economists in a Reuters poll dismissing recession concerns.

Trader will closely monitor the minutes of the Fed's July policy meeting on Wednesday and Chair Jerome Powell's speech at the Jackson Hole symposium on Friday for further hints.

The U.S. dollar dipped to a seven-month low in the previous session, lending support to dollar-denominated gold.[USD/] [US/]

Holdings of SPDR Gold Trust (P:GLD), the world's largest gold-backed exchange-traded fund, jumped to their highest in seven months at 859 tonnes on Monday. [GOL/ETF]

Among other metals, spot silver fell 0.8% to $29.25 per ounce. Platinum gained 0.6% to $958.95 and palladium shed 0.8% to $924.75.

By Howard Schneider

WASHINGTON (Reuters) - Four years after Federal Reserve Chair Jerome Powell made fighting unemployment a bigger priority during the COVID-19 pandemic, he faces a pivotal test of that commitment amid rising joblessness, mounting evidence inflation is under control, and a benchmark interest rate that is still the highest in a quarter of a century.

High interest rates may be on the way out, with the U.S. central bank expected to deliver a first cut at its Sept. 17-18 meeting and Powell potentially providing more information about the approach to the policy easing in a speech on Friday at the Kansas City Fed's annual conference in Jackson Hole, Wyoming.

But with the Fed's policy rate in the 5.25%-5.50% range for more than a year, the impact of relatively high borrowing costs on the economy may still be building and could take time to unwind even if the central bank starts cutting - a dynamic that could put hopes for a "soft landing" of controlled inflation alongside continued low unemployment at risk.

"Powell says the labor market is normalizing," with wage growth easing, job openings still healthy, and unemployment around what policymakers see as consistent with inflation at the central bank's 2% target, former Chicago Fed President Charles Evans said. "That would be great if that is all there is. The history is not good."

Indeed, increases in the unemployment rate like those seen in recent months are typically followed by more.

"That does not seem the situation now. But you may only be one or two poor employment reports away" from needing aggressive rate cuts to counter rising joblessness, Evans said. "The longer you wait, the actual adjustment becomes harder to make."

INFLATION VERSUS EMPLOYMENT

Evans was a key voice in reframing the Fed's policy approach, unveiled by Powell at Jackson Hole in August 2020 as the pandemic was raging, policymakers were gathering via video feed, and the unemployment rate was 8.4%, down from 14.8% that April.

In that context the Fed's shift seemed logical, changing a long-standing bias towards heading off inflation at the expense of what policymakers came to view as an unnecessary cost to the job market.

Standard monetary policymaking saw inflation and unemployment inextricably and inversely linked: Unemployment below a certain point stoked wages and prices; weak inflation signaled a moribund job market. Officials began to rethink that connection after the 2007-2009 recession, concluding they needn't treat low unemployment as an inflation risk in itself.

As a matter of equity for those at the job market's margins, and to achieve the best outcomes overall, the new strategy said Fed policy would "be informed by assessments of the shortfalls of employment from its maximum level."

"This change may appear subtle," Powell said in his 2020 speech to the conference. "But it reflects our view that a robust job market can be sustained without causing an outbreak of inflation."

A pandemic-driven inflation surge and dramatic employment recovery made that change seem irrelevant: The Fed had to raise rates to tame inflation, and until recently the pace of price increases had slowed without much apparent damage to the job market. The unemployment rate through April had been below 4% for more than two years, an unparalleled streak not seen since the 1960s. The unemployment rate since 1948 has averaged 5.7%.

But the events of the last two years, and a coming Fed strategy review, have also triggered a wave of research into exactly what happened: why inflation fell, what role policy played in that, and how things might be done differently if inflation risks rise again.

While the agenda for this year's conference remains under wraps, the broad theme focuses on how monetary policy influences the economy. That bears on how officials may evaluate future choices and tradeoffs and the wisdom of tactics like preempting inflation before it starts.

Some of that work is already emerging from Fed researchers, including top economist Michael Kiley. He has authored a paper questioning whether policy "asymmetry" - treating employment shortfalls differently than a tight labor market, for example - really helps. Another recent paper suggested policymakers who believe public inflation expectations are formed in the short-run and are volatile should react sooner and raise rates higher in response.

The role public expectations play in driving inflation - and the policy response - was on full display in 2022. When it appeared expectations risked moving higher, the Fed pushed its tightening cycle into overdrive with 75-basis-point hikes at four consecutive meetings. Powell then used a truncated Jackson Hole speech to emphasize his commitment to fight inflation - a stark shift from his jobs-first commentary two years earlier.

It was a key moment that put the U.S. central bank's seriousness on display, underpinned its credibility with the public and markets, and rebuilt some of the standing that preemptive policies had lost.

'TOO TIGHT'

Powell now faces a test in the other direction. Inflation is progressing back to 2%, but the unemployment rate has risen to 4.3%, up eight-tenths of a percentage point from July 2023.

There's debate over what that really says about the labor market versus rising labor supply, a positive thing if new job seekers find employment.

But it did breach a rule-of-thumb recession indicator, and while that has been downplayed given other indicators of a growing economy, it also is slightly above the 4.2% that Fed officials regard as representing full employment.

It's also higher than at any point in Powell's pre-pandemic months as Fed chief: It was 4.1% and falling when he took over in February 2018.

The "shortfall" in employment that he promised to respond to four years ago, in other words, may already be taking shape.

While Powell will be reluctant to ever declare victory over inflation for fear of touching off exuberant overreaction, Ed Al-Hussainy, senior global rates strategist at Columbia Threadneedle Investments, said it was past time for the Fed to get in front of the risk to unemployment - preemption of a different sort.

Al-Hussainy said the Fed had proved its ability to keep public expectations about inflation in check, an important asset, but that "also has put in motion some downside risk to employment."

"The policy stance today is offside – it is too tight – and that warrants acting on."