RIO DE JANEIRO (Reuters) -Japan has warned of the need to be increasingly vigilant to excessive foreign exchange fluctuations driven by speculation at a Group of 20 meeting, top currency diplomat Masato Kanda said on Thursday.

"Japan has said we must respond appropriately based on G20 comittments that excessive currency volatility has a negative impact on the economy and financial stability," Kanda said.

He made the comments during a press conference at the G20 finance ministers and central bank governors meeting in Rio de Janeiro, Brazil.

The Japanese yen rallied for a fourth session against the dollar on Thursday, hitting the highest in more than two months, as investors unwound their long-running bets against the currency ahead of a Bank of Japan meeting next week.

RIO DE JANEIRO (Reuters) - Brazilian Finance Minister Fernando Haddad said on Thursday that G20 finance leaders were poised to endorse a joint declaration on international tax cooperation addressing issues such as the taxation of super-rich individuals.

"I like to see the declaration not as the end of a journey, but as a starting point," said Haddad in his public remarks opening a discussion of taxation with his counterparts. He also called on the group to "advance towards a coordinated global minimum tax on billionaires" - a proposal Brazil has pushed with its presidency of the Group of 20 major economies this year.

By Lucia Mutikani

WASHINGTON (Reuters) - U.S. economic growth likely picked up in the second quarter, spurred by solid consumer spending and inventory building, but the pace of expansion should still leave expectations of a September interest rate cut from the Federal Reserve intact.

The Commerce Department's advance report on second-quarter gross domestic product on Thursday is also expected to show inflation slowing considerably last quarter, with sub-3% readings on all measures, welcome news for U.S. central bank officials ahead of their two-day policy meeting next week.

The economy, which continues to outperform its global peers despite hefty rate hikes from the Fed in 2022 and 2023, remains supported by a resilient labor market even as the unemployment rate has risen to a 2-1/2-year high of 4.1%.

"The economic expansion is tracking the Goldilocks outlook, which is slower growth and a lower rate of inflation," said Brian Bethune, an economics professor at Boston College. "Consumer spending is keeping things in motion."

Gross domestic product likely increased at a 2.0% annualized rate last quarter, according to a Reuters survey of economists. It would be just above the 1.8% pace that Fed officials regard as the non-inflationary growth rate. Estimates ranged from a 1.1% rate to a 3.4% pace.

The survey was, however, conducted before Wednesday's advance indicators data, which showed the goods trade deficit narrowing in June and retail and wholesale inventories increasing. The data prompted the Atlanta Fed to trim its second-quarter GDP estimate to a 2.6% rate from a 2.7% pace.

The economy grew at a 1.4% rate in the first quarter. Still, growth would remain considerably slower than the 4.2% pace logged in the second half of last year.

Consumer spending, which accounts for more than two-thirds of the economy, is forecast to have increased at around a 2.0% rate after slowing to a 1.5% pace in the January-March quarter. Much of the increase in spending was in June.

Businesses accumulated more inventory, which economists estimated could add at least a full percentage point to GDP growth, after being a drag for two straight quarters. Despite the anticipated boost from inventories, economists expected growth in domestic demand at around a 2.4% pace.

The anticipated rise in GDP growth bodes well for an acceleration in productivity, which would slow the pace of increase in labor costs and ultimately price pressures. The personal consumption expenditures price index, excluding the volatile food and energy components, is forecast increasing at a 2.7% rate after surging at a 3.7% pace in the first quarter.

The so-called core PCE is one of the inflation measures tracked by the Fed for its 2% target. The government's broadest gauge of prices in the economy, the gross domestic purchases price index, is seen rising at a 2.6% pace after jumping at a 3.1% rate in the January-March quarter.

DRAG FROM TRADE

"Inflation may well turn out to be a bigger story than the actual growth numbers," said Dan North, senior economist at Allianz (ETR:ALVG) Trade North America.

The Fed has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range for the past year.

It has hiked its policy rate by 525 basis points since 2022, and a moderation in inflation, combined with a cooling labor market would boost financial market expectations for three rate cuts this year, starting in September.

Business spending on equipment is forecast to have accelerated after tepid growth in the first quarter. Government spending is also expected to have contributed to growth. But trade likely subtracted from growth as exports softened amid slower global demand and a strong dollar.

Pantheon Macroeconomics estimated that the trade deficit subtracted as much as 1.4 percentage points from GDP growth, which would be the biggest drag in more than two years. The hit on GDP was likely to be more than offset by the rise in inventories. A surge in mortgage rates in the spring probably undermined the housing market recovery.

Residential investment, which includes homebuilding and sales, is expected to have contracted after posting double-digit growth in the first quarter.

Despite the anticipated pick-up in economic growth, the outlook for the second half of the year is hazy. The labor market is slowing, which will impact wage gains.

The saving rate is well below its pre-pandemic average and economists estimate that the bulk of the Fed's rate hikes is still to be felt. State and local government revenues are also slowing, which could erode spending. There are also worries about new tariffs, which could see businesses front-loading imports if former President Donald Trump is returned to the White House in November's presidential election.
 

Nonetheless, a recession is not expected, with monetary policy easing anticipated this year.

"Changes in corporate borrowing costs for small and medium-sized businesses have historically taken about two years to dampen GDP growth, suggesting the bulk of the impact of the Fed's hiking cycle, which ended only 12 months ago, lies ahead," said Ian Shepherdson, chief economist at Pantheon Macroeconomics. "We expect growth in GDP to slow to a 1.0% to 1.5% range in the second half."

(Reuters) - China surprised financial markets with an off-cycle cut to bank funding costs on Thursday. Stocks fell and bonds rallied after the announcement of a 20 basis point reduction in the one-year medium-term lending facility (MLF).

Here are reactions from market analysts:

LEMON ZHANG, FX & EM MACRO STRATEGIST, BARCLAYS, SINGAPORE

"The fact that scale is bigger than 10 basis points suggests there's more to come in terms of benchmark rate cuts.

"I would think it helps on the margin. But after all, you still have a very subdued growth momentum."

MARCO SUN, CHIEF FINANCIAL MARKET ANALYST, MUFG BANK (CHINA), SHANGHAI

"The risk of another slowdown in China's economic growth is on the rise. China's GDP growth slowed in the second quarter ... and a cut in the policy rate could reduce the cost of financing and release liquidity to maintain the momentum of the economic recovery. A large amount of MLF loans are coming due, and it could be another reason explaining the MLF operation."

GARY NG, ASIA-PACIFIC SENIOR ECONOMIST, NATIXIS, HONG KONG

"It shows the PBOC wants to be more accommodating to banks in lowering their medium-term funding costs ... cutting the MLF rate at a larger scale can help shield the net interest margin.

"The yuan may still be under pressure if investors continue to expect lower interest rates in China. If confidence improves ... the yuan may not necessarily depreciate as net capital inflows may return."

FRANCES CHEUNG, HEAD OF FX AND RATES STRATEGY, OCBC BANK, SINGAPORE

"The MLF was done when there is no near-term maturity, showing that PBOC intends to send an easing signal. The cut in the MLF rate is of a bigger magnitude than the cut in 7-day reverse repo rate, primarily because the MLF rate was at an elevated level compared to other sources of funds."

KHOON GOH, HEAD OF ASIA RESEARCH, ANZ, SINGAPORE

"In terms of the challenges facing the Chinese economy, rate cuts by themselves, particularly of this magnitude, is not really going to be that material.

"Issues facing the property sector (and) the lack of confidence that is holding back consumer spending ... need more concrete fiscal support or other type of policy measures to address."

By Stella Qiu and Wayne Cole

SYDNEY (Reuters) - Asian shares were hammered on Thursday as a slump in global tech stocks sent investors fleeing into less risky assets, including short-dated bonds, the yen and Swiss franc.

Chinese stocks were given little support after the country's central bank sprang a surprise cut in longer-term rates, adding to a recent rush of stimulus measures.

The sell-off in stocks saw investors ramp up bets on rate cuts globally, with futures implying a 100% chance of a Federal Reserve easing in September. A spike in market volatility fuelled a vicious squeeze on carry trades which saw the dollar sink another 0.6% to 152.85 yen on Thursday.

MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.7%, while Japan's Nikkei tumbled 2.9% and South Korea's KOSPI dropped 2%. Taiwan's markets were closed for a second day due to a typhoon.

Chinese blue-chips pared earlier losses to be down 0.1%, although the Shanghai Composite index was still off 0.3%, hitting five-month lows.

Hong Kong's Hang Seng dropped 0.6%, finding little support from Beijing's latest easing step.

On Wall Street, the Nasdaq lost almost 4% - the worst one-day fall since 2022 - as lacklustre Alphabet (NASDAQ:GOOGL) and Tesla (NASDAQ:TSLA) earnings undermined investor confidence in the already lofty valuations of the "Magnificent Seven" stocks. [.N]

That added to recent market volatility, with Wall Street's fear gauge jumping to a three-month high. Investors looked for the safety of cash and super-liquid short term debt, with U.S. two-year yields hitting their lowest in almost six months on Wednesday.
 

In early Asian trade, Nasdaq futures rebounded 0.4% and S&P 500 stock futures rose 0.3%.

"Traders have played outright defence, as the saturated and well-owned tech position continues to be unwound," said Chris Weston, head of research at Pepperstone.

"We can also add an ongoing unease around China's growth trajectory, very poor PMIs in Europe and a bearish opinion piece from ex-New York Fed member Bill Dudley, and investors and traders derisked and de-grossed portfolios."

The other big mover in Asia was the safe-haven yen, up 0.6% to the strongest in 2-1/2 months. It surged 1.1% overnight, with the upward momentum intact ahead of the Bank of Japan's meeting next week where policymakers will debate whether or not to raise interest rates.

The Swiss franc also rose 0.7% overnight.

Short-dated bonds rallied overnight, supported by comments from Bill Dudley, a former president at the New York Fed that the central bank should cut rates, preferably at its policy meeting next week.

The yield on two-year Treasuries fell 4 basis points overnight and was last steady at 4.4121%.

Markets are fully pricing in a quarter-point rate cut from the Fed in September, with even some risk for a 50 basis point cut. For all of 2024, a total easing of 65 basis points has been priced in.

"The rate cut expectations are getting very elevated the same way as they were last year," said Andrew Lilley, chief rates strategist at Barreyjoey in Sydney.

"My worry is that the market is getting ahead of the economic data because we have seen previously that these short-term dips in inflation haven't been sustained."

Indeed, advance U.S. gross domestic product data is due later on Thursday and is forecast to show growth picking up to an annualised 2% in the second quarter. The closely watched Atlanta Fed GDPNow indicator points to growth of 2.6%, suggesting some risk to the upside.

In commodity markets, gold fell 0.9% to $2,375.92 an ounce. [GOL/]

Oil prices ticked lower and held near six-week lows on worries about a slowing Chinese economy crimping demand. [O/R]

Brent futures fell 0.4% to $81.81 a barrel, while U.S. West Texas Intermediate (WTI) crude also dropped 0.3% to $77.33.

By Emma Farge

GENEVA (Reuters) - Countries and environmental groups voiced concern and disappointment on Tuesday after a draft treaty to cut fishing subsidies failed to pass, with China calling for major changes in how countries negotiate at the World Trade Organization.

The talks, seen as critical to helping over-fished stocks recover, have been going on for more than 20 years at the WTO with an initial package approved in 2022.

The second phase tackling some of the toughest remaining issues had been drafted for approval at a WTO meeting this week but was blocked by India which criticised what it called the treaty's "significant shortcomings" while seeking deeper carve-outs for developing countries.

As a result, the talks were downgraded from being up for adoption to merely being "discussed" by the WTO's 166 members, any one of which can block a deal under the body's rules.

"We are deeply concerned for our future work here in the WTO on these negotiations," said U.S. Ambassador Maria Pagan. On India's proposals, she said: "We find it difficult to understand the objectives of these papers when they re-introduce topics that have been debated and discussed repeatedly...," she said.

China, a major subsidiser, voiced deep disappointment that it had not been adopted. "The fish and this planet cannot wait any longer," said Ambassador Li Chenggang, who did not name India but referred to multiple failures of these talks "due to the same or similar reasons".

"We need to think about how to get out of this dilemma ... Let's change. No reform, no success," he said.

Environmental groups also expressed regret.

"The longer we wait, the more fishers are hurt by damaging subsidies that deplete the fish populations that coastal communities depend on," said The Pew Charitable Trusts's Ernesto Fernández Monge.

By Marcela Ayres and David Lawder

RIO DE JANEIRO (Reuters) - G20 finance leaders meeting in Brazil are preparing a joint statement for Thursday in support of progressive taxation that will stop short of endorsing the hosts' proposal for a global "billionaire tax," two G20 officials told Reuters.

Brazil's presidency of the Group of 20 major economies this year has drummed up initial support from some countries for a joint effort to tax ultra-high-net-worth individuals, although debate has been preliminary.

France, Spain, Colombia, Belgium and the African Union have backed the idea, along with South Africa, which will assume the G20 presidency next year. However, the idea has hit high-profile resistance, including from U.S. Treasury Secretary Janet Yellen.

Sources at the German finance ministry, which came out against the idea in April, said that a tax on the super-rich was off the table at this week's G20 meetings. Tax discussions would focus on other ideas, such as combating tax avoidance and wealth concealment, the sources said.

One of the G20 officials familiar with talks, who requested anonymity to discuss ongoing negotiations, said Thursday's joint statement is expected to include a call for cooperation to reduce tax evasion by the super-rich through greater exchange of information and best practices.

A broader G20 joint communique is expected on Friday, when finance ministers and central bankers conclude this week's meetings in Rio de Janeiro.

Despite skepticism, the G20 discussions of a global billionaire tax have garnered praise from former world leaders including 19 members of the Club de Madrid, a forum of more than 100 former presidents and prime ministers.

At a seminar in Brasilia last month, officials discussed the proposal from the independent EU Tax Observatory to levy a 2% wealth tax on fortunes over $1 billion, raising estimated revenue of up to $250 billion annually from 3,000 individuals.

BANGKOK (Reuters) - Thailand's 500 billion baht ($13.85 billion) "digital wallet" handout scheme is a necessary stimulus measure to boost a lagging economy held back by low income and high household debt, its finance minister said Wednesday.

Projected economic growth of 2.4% this year is low and a result of structural issues, Pichai Chunhavajira said, adding those problems were being fixed in parallel to stimulus measures to jumpstart the economy, Southeast Asia's second-biggest.

The scheme is the ruling Pheu Thai party's flagship policy and was a key vote-winner, but the government has suffered delays in rolling it out due to challenges over funding it.

Some experts, including former central bankers, have called it fiscally irresponsible due to potential impacts on public debt, while the Bank of Thailand has recommended it be targeted more towards vulnerable sectors, rather than a mass handout that will provide only a short-term remedy.

The government denies this and said it would closely adhere to fiscal discipline.

The government was due to announce details on Wednesday how the digital wallet scheme will work ahead of its implementation in the fourth quarter.

It entails transferring credit of 10,000 baht ($277) to 50 million recipients via a smartphone application, to spend in their localities within a six-month period.

($1 = 36.0700 baht)

Investing.com-- Concerns over a second Donald Trump presidency have weighed on Asian markets, specifically China, on what new headwinds they could bring for the region through increased protectionist policies. 

Analysts at ANZ said that while tariff increases appeared likely if Trump did win the November elections, they would not be as severe as he had foreshadowed. 

ANZ said that Trump would be likely to rein-in more extreme policy positions, given that he also holds an agenda for boosting U.S. economic growth and equity markets. 

Tax cuts and looser regulations were likely to be positive for U.S. growth, but any more expansionary fiscal policy and checks on immigration were likely to increase inflation, ANZ said. 

China faces more tariffs in Trump presidency 

ANZ said that while a Trump presidency was likely to broaden protectionist U.S. policies to other economies, China will still remain exposed to tighter trade regulations. Such a scenario bodes poorly for the country, which is already struggling with a slowing economic recovery. 

“(China’s) current dependence on production and exports to fuel GDP-growth suggests any tariffs, even if substantially less than the 60% Trump has mentioned, will be costly,” ANZ analysts wrote in a note. 

Trump could also apply more trade pressure on China by revoking the country’s Most Favored Nation status, further cutting off the country from the U.S. economy and pressuring domestic growth.

China's blue-chip CSI300 index was nursing an over 1% loss in the past week. Trump has so far maintained a largely hawkish stance towards China, and has called for stricter policies against Beijing to offset the country's trade dominance.

Dollar likely to firm under Trump, but not overwhelmingly

ANZ expects the dollar to firm and Asian currencies to weaken under a Trump presidency, likely driven by more protectionist policies and improved economic growth.

Among Asian currencies, the Chinese yuan and the Japanese yen are most likely to be impacted by stricter U.S. policies. 

A renewed trade war with China, coupled with tighter U.S. policies, could spark an “across-the-board 10% depreciation in most Asian currencies,” ANZ said, with potentially worse conditions for the Chinese yuan. 

But strength in the dollar is expected to be limited, especially given that Trump and his running mate, Ohio Senator J.D. Vance, have been calling for a weaker dollar to support U.S. exports. 

But while concerns over a Trump presidency have dented Asian markets in recent weeks, it still remains unclear if such a scenario will come to pass. Trump is set to square off against presumed Democratic Presidential candidate Kamala Harris in the 2024 race.

By Ankur Banerjee

SINGAPORE (Reuters) - Asian stocks were subdued on Wednesday after lacklustre earnings from U.S. tech behemoths Tesla (NASDAQ:TSLA) and Alphabet (NASDAQ:GOOGL) dented sentiment, while the yen hit a six-week high ahead of a central bank meeting next week where a rate hike remains on the table.

The U.S. dollar was broadly firm, with traders watching out for an inflation reading on Friday and Federal Reserve meeting next week. The Bank of Japan is also due to meet next week, where a 10 basis point hike is priced at a 44% chance. [FRX/]

MSCI's broadest index of Asia-Pacific shares outside Japan was 0.08% lower at 566.26, not far from the one-month low of 562.43 it touched on Monday.

Japan's Nikkei fell 0.23% while Taiwan financial markets are closed due to a typhoon.

Nasdaq futures fell 0.5%, while S&P 500 futures eased 0.36% after Tesla reported its smallest profit margin in more than five years. Shares of Google-parent Alphabet slipped in after-hours trade even after the firm beat revenue and profit targets.

"The bar was set so high for Alphabet that a modest earnings beat couldn't push the stock higher. So, the market has no news to buy into," said Kyle Rodda, senior financial market analyst at Capital.com.

"It also speaks to concerns that tech stocks are too richly valued here. We will have to see how the other tech giants report and how the markets react."

Chinese stocks were lower in choppy trading, with the Shanghai Composite index down 0.18%, while the blue-chip CSI300 index was 0.19% lower after recording its largest one-day decline since mid-January on Tuesday.

Investor sentiment remained fragile in the world's second-biggest economy despite stimulation efforts.

On the macro side, investors await the U.S. GDP data on Thursday and PCE data - the Fed's favoured measure of inflation - on Friday to gauge the expectations of interest rate cuts this year.

Markets are pricing in 62 basis points of easing this year, with a cut in September priced in at 95%, the CME FedWatch tool showed.

A growing majority of economists in a Reuters poll said the Fed will likely cut rates just twice this year, in September and December, as resilient U.S. consumer demand warrants a cautious approach despite easing inflation.

"The U.S. consumer has remained extremely strong ... but you're starting to see a degree of fragility underlying some of the data," said Luke Browne, head of asset allocation for Asia at Manulife Investment Management.

"We are expecting probably two cuts from the Fed now, there is of course a high degree of uncertainty. We watch closely the data as it evolves and whilst inflation has been easing somewhat, there remain pressures underlying that."

YEN RIDE

The Japanese yen rose to touch 155.25 per dollar in Asian hours, its highest since June 7 after surging nearly 1% on Tuesday, having languished near a 38-year low of 161.96 at the start of the month.

Traders suspect Tokyo intervened in the currency market in early July to yank the yen away from those lows, with estimates from BOJ data indicating authorities may have spent roughly 6 trillion yen ($38.62 billion) to prop up the frail currency.

The bouts of intervention have led speculators to unwound popular and profitable carry trades, in which traders borrow the yen at low rates to invest in dollar-priced assets for a higher return.

The yen was broadly higher, with the Japanese unit touching a one-month high against the pound, the euro and a two-month high against the Australian dollar

The dollar index, which measures the U.S. currency against six rivals, was little changed at 104.47. The index is down 1.3% this month.

Investor focus on Wednesday will also be on purchasing managers' index figures across the globe to gauge the health of economies.

In commodities, oil prices rose on falling U.S. crude inventories. Brent crude futures for September rose 0.25% to $81.21 a barrel, while U.S. West Texas Intermediate crude for September gained 0.26% to $77.16 per barrel.

($1 = 155.3600 yen)