By Timothy Aeppel

(Reuters) - Even a robot invasion can't beat a slowing economy.

Companies in North America sharply cut orders for the high-tech machines in the second quarter, according to data compiled by the Association for Advancing Automation, an industry group.

The slowdown in orders began at the end of last year, as rising interest rates and sagging economic growth curbed appetites for new robots, the group, also known as A3, said.

"We wouldn't even consider buying a robot right now," said Nancy Kleitsch, chief financial officer of ICON Injection Molding, a maker of plastic components in Phoenix.

Like many producers, ICON's business shot up during the COVID-19 pandemic, including demand for its plastic tubes used in pandemic testing. But demand for the tubes and other parts of the company's business have now slumped to levels not seen in at least seven years, Kleitsch said.

INFLATION, GROWTH WORRIES

Many other companies appear to share ICON's hesitation on robots. Factories and other industrial users, including e-commerce warehouses and medical testing companies, ordered 7,697 robots in the second quarter, a 37% decline from a year ago. That followed a 21% drop in the first quarter and 22% decline in the fourth quarter of last year.

Robot sales boomed through the pandemic, as producers scrambled to use the machines to churn out badly needed goods. Indeed, even with the slowdown that hit late last year, 2022 marked a record year for orders, according to A3.

But robots are just one type of equipment companies need, and other gauges of spending have held up somewhat better in the U.S. economy. Orders for non-defense capital goods excluding aircraft - closely watched by economists to track trends in business spending - rose 0.1% last month, according to the Commerce Department, suggesting that investments in a wide array of equipment could continue to grow after rebounding in the second quarter.

"It's not that we've soured on automating," Jeff Burnstein, president of A3, said in an interview with Reuters. "But when people are worried about inflation and the economy, it puts a damper on everything - they hold off."

Some industries appear to have over-invested in robots during the recent boom. E-commerce companies, for instance, rushed to build highly automated warehouses in anticipation of continued torrid growth in demand for goods. It hasn't. Another problem, said Burnstein, were companies that ordered too many robots as they feared supply-chain delays.

"They were worried they wouldn't get what they needed, so they overbought," he said. Burnstein added that A3 expects the softness in robot orders to continue until the fourth quarter or early next year.

WIDENING USES

One factor that helped drive robot sales over the past few years was a tight labor market. The unemployment rate in July - at 3.5% - was near levels last seen more than 50 years ago. But worker shortages are easing. Another gauge measuring U.S. job openings dropped to the lowest level in nearly 2-1/2 years in July as the labor market slowed, the Labor Department said on Tuesday.

Meanwhile, robots continue to worm their way into an ever-wider variety of jobs. In the past, they were concentrated in auto factories and their suppliers, which still make up a large share of all robot orders. But the A3 data shows that in recent years robots have spread to everything from construction sites - where they are now used to do tasks like laying down lines on floors to guide crews on where to install walls - to hospitals and food-processing plants.

Aaron Anderson, director of innovation at Swinerton, a large construction company based in Concord, California, said his company has started using a robot that drills holes in concrete ceilings, opening the way for plumbing other mechanical systems to be installed by workers.

But Anderson said it's difficult to justify the cost of buying one of the machines. Since construction projects vary in size and complexity, he said, there are spells when the robot isn't needed at all.

Swinerton's answer: It leases the machine instead, which costs far less.

By Sakura Murakami

TOKYO (Reuters) - Japan's defence ministry made a record spending request on Thursday of 7.7 trillion yen ($52.67 billion), for fiscal 2024, the latest step of a plan to boost defence spending by 43 trillion yen over five years.

The request is for the second year of Prime Minister Fumio Kishida's plan to double defence spending to 2% of gross domestic product by 2027 as it faces up to an increasingly assertive China and unpredictable North Korea.

The request comes as Japan's relations with China have deteriorated sharply with Japan last week beginning to dump treated radioactive water from its wrecked Fukushima nuclear plant into the sea. China has condemned the release and banned Japanese seafood imports.

The fiscal 2024 request, submitted to the Ministry of Finance, adds almost a trillion yen to the previous year's budget of 6.8 trillion yen. If approved, the budget will have increased spending by about a trillion yen from the previous year for an unprecedented two consecutive years.

The defence ministry plans to set aside more than 900 billion yen to secure ammunition and weapons, including new ship-to-air missiles, according to the budget request.

Some 600 billion yen will be used to strengthen logistics capabilities to deploy weapons and resources towards southwest island chains in the event of an emergency.

The budget includes funding for three new landing ships, for a total of 17 billion yen, 17 transport helicopters, for more than 300 billion yen, and a new specialised transport team to improve deployment capabilities, the defence ministry said in its request.

Japan will also put 75 billion yen towards jointly developing interceptor missile to counter hypersonic warheads with the United States, and 64 billion yen to creating next-generation fighter jets with Britain and Italy.

The record defence spending by the staunch U.S. ally comes after decades of pacifist policies. The United States in 1947 imposed a constitution on Japan that renounces war.

But concerns over China's maritime ambitions and military assertiveness, especially over Taiwan, and a belligerent and increasingly well armed North Korea have shifted thinking, as has Russia's invasion of Ukraine.

Japanese aggression before and during World War Two is still a cause of tension in relations with some countries in Asia and Japan has given assurances its growing military strength will not be used to threaten others.

Japan has said it will still prioritise diplomatic efforts and dialogue to avert misunderstandings.

By Stella Qiu

SYDNEY (Reuters) - Asian shares were set for their worst month since February, with sentiment hurt by still-gloomy China factory readings on Thursday, as investors awaited a barrage of U.S. data that could add to bets that interest rates have peaked.

Europe is likely to open in a subdued manner, with EUROSTOXX 50 futures up a slight 0.1%. Both S&P 500 futures and Nasdaq futures were little changed.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.3% and was headed for a monthly loss of 6.3%, the largest since February. Japan's Nikkei, however, gained 1%.

Data on Thursday showed China's manufacturing activity contracted for a fifth straight month in August, but the pace of declines moderated, while the expansion in services sector lost a little momentum.

"The latest official PMI data were not uniformly bad," said Robert Carnell, head of research, Asia-Pacific, at ING.

"Both series (manufacturing and services) seem to be converging on a point close to 50 consistent with an economy that is neither expanding nor contracting. Things could be worse. But markets are not likely to take too much comfort from this set of data."

Chinese blue-chips fell 0.6% while Hong Kong's Hang Seng Index gave up earlier gains to be off 0.5%, weighed by a 1.8% drop in property developers.

Shares in Baidu (NASDAQ:BIDU) and SenseTime gained 3.1% and 2.6%, respectively, as they launched artificial intelligence (AI) chatbots to the public after obtaining government approval.

China's largest private property developer Country Garden warned of default risks if its financial performance continues to deteriorate, fuelling concerns that piecemeal support measures from Chinese authorities are not enough to engineer a turnaround in a critical sector.

Despite the China gloom, the investor mood perked up in August, with a global confidence index (ICI) from State Street (NYSE:STT) Global Markets surging 11.4 points to 107.7, led by North America which recorded the strongest reading in a year on easing recession fears.

Overnight, Wall Street rose after a slew of U.S. economic indicators generally surprised to the downside, adding to bets that the Federal Reserve is done tightening and rate cuts next year could amount to more than 100 basis points.

Private payrolls clocked a 52.3% monthly drop, adding to signs of a softening in the labour market, while second-quarter GDP was revised lower.

Attention now turns to inflation numbers as measured by the U.S. personal consumption expenditures (PCE) on Thursday - the Federal Reserve's preferred gauge of inflation - and non-farm payrolls on Friday.

Action in the Treasuries market was muted after a brutal sell-off earlier this month. Ten-year yields held at 4.1140%, having steadied in the past few sessions. They were nonetheless 16 basis points higher in August.

Two-year yields stood at 4.8899% on Thursday, after briefly dipping to a three-week low of 4.8360% overnight.

There was, however, less cheer in Europe on the inflation front. Annual inflation in Germany and Spain barely slowed in August, against expectations, raising the stakes for the euro zone inflation numbers later in the day.

Bets that the European Central Bank will have to hike in September saw the euro surge on the yen, hitting a 15-year high of 159.76 yen overnight. It last hovered at 159.4 yen on Thursday.

Oil prices were mostly flat. Brent crude futures were little changed at $85.90 per barrel and U.S. West Texas Intermediate crude futures were steady at $81.67.

The gold price was slightly higher at $1,945.49 per ounce.

By Wayne Cole

SYDNEY (Reuters) - Australian business investment climbed to its highest since late 2015 in the June quarter as firms took advantage of tax breaks to splurge on new equipment, while plans for future spending were also upgraded in a much-needed boost to the economy.

Data from the Australian Bureau of Statistics on Thursday showed private capital spending climbed a real 2.8% in the second quarter from the previous quarter, handily beating forecasts of a 1.2% increase.

Spending of A$37.58 billion ($24.43 billion) was the highest since late 2015, while investment in equipment reached a record peak of A$17.53 billion.

The construction sector boasted the biggest gains as firms finally received deliveries of machinery and vehicles after lengthy supply-chain delays.

Firms also lifted spending plans for the fiscal year to June 2024 to A$157.8 billion, up 14.5% on the previous quarter.

The strength in investment is a welcome shot in the arm to economic growth given rising interest rates and painfully high inflation has taken a heavy toll on consumer spending.

Figures for gross domestic product (GDP) for the June quarter are due next week and analysts are tipping growth of only around 0.3%. That would see the annual pace slow to just 1.8%, the lowest since early 2021 when the economy was emerging from pandemic lockdowns.

Indeed, an extended period of sub-par growth lies ahead as the Reserve Bank of Australia (RBA) tries to curb inflation with interest rates at decade highs of 4.1%.

Inflation figures for July out on Wednesday suggested the policy was working, albeit gradually, and markets assume rates will again be held steady at the RBA's September policy meeting next week.

Investors also suspect the entire tightening cycle might now be over as futures imply only around a 40% chance of a hike by year end.

Nomura economist Andrew Ticehurst cautioned there was a risk of perhaps one final rate rise in November, though it would be a very close call.

"At the same time, the latest data support our broader views that the economy will skirt with recession and inflation will ease further over coming quarters, and that the RBA could commence a more aggressive easing cycle than is currently priced, next year," he said.

He is tipping three quarter-point cuts in 2024 starting in May, while markets are leaning toward just one easing late in the year.

($1 = 1.5370 Australian dollars)

BEIJING (Reuters) -China's manufacturing activity contracted for a fifth straight month in August, but at a slower than expected pace, an official factory survey showed on Thursday, maintaining pressure on Beijing to step up policy support for the stuttering economy.

The official purchasing managers' index (PMI) rose to 49.7 from 49.3 in July, according to the National Bureau of Statistics, staying below the 50-point level demarcating contraction from expansion. The reading was above a forecast of 49.4.

The Chinese economy risks missing Beijing's annual growth target of around 5% as it contends with a worsening property slump, weak consumer spending and tumbling credit growth, leading major banks to downgrade their growth forecasts for the year.

Beijing on Sunday announced halving the stamp duty on stock trades, the first cut to the tax since 2008, to boost investor sentiment.

Detailed rules were also unveiled on Friday to ease first-home mortgages. And some Chinese state-owned banks will soon lower interest rates on existing mortgages.

The fresh moves came after a raft of measures aimed at reviving big-ticket purchases, notably of new-energy vehicles. Still, many analysts see only a slim chance for any drastic stimulus amid concerns over mounting debt risks.

The official non-manufacturing PMI fell to 51.0 from 51.5 in July, while the composite PMI, including both manufacturing and non-manufacturing activity, rose to 52.3 from 51.1.

LONDON (Reuters) - British companies are their most confident since before Russia's invasion of Ukraine, according to a survey that also showed they planned to keep on raising prices and staff pay, adding to worries for the Bank of England about high inflation.

Contrasting with signs of an economic slowdown in other recent surveys, the Lloyds (LON:LLOY) Bank Business Barometer measure of confidence jumped by 10 points in August to 41%, its highest since February 2022.

"The bounce in economic optimism this month is the stand-out point," Hann-Ju Ho, senior economist at Lloyds Bank, said.

"Our analysis shows that businesses felt relief that interest rates may be reaching their peak, alongside hopes that measures to tackle inflation are having an impact."

The BoE raised rates for the 14th time in a row this month to counter an inflation rate running at almost 7%. But the quarter-percentage-point increase was smaller than June's 50-basis-point hike.

Investors mostly expect the Bank Rate to peak this year at 5.75%, up from its current level of 5.25%.

Britain has avoided a widely forecast recession so far this year but worries about an economic slowdown grew last week when a measure of business activity in August fell to its lowest since January 2021.

Thursday's survey showed firms' hiring intentions were the strongest in 15 months and the share of businesses planning to increase staff wages was the highest since Lloyds began asking about pay in 2018, with 30% of firms predicting a 3% pay rise.

Other surveys have shown pressure on firms to raise pay by more although human resources data company XpertHR last week reported the first slowdown this year in the pace of wage deals during the three months to July.

A net balance of 56% of firms intended to increase their prices, Lloyds said.

Smaller firms were more upbeat than bigger ones which had more exposure to the global economy and manufacturing firms were more downbeat than other companies, it said.

By Marco Aquino

LIMA (Reuters) - Peru lowered its economic growth forecasts for 2023 and 2024 on Tuesday amid poor weather, lower private investment in mining, and anti-government protests earlier this year.

The South American country's economy is expected to grow 1.1% this year, the economy ministry said in Peru's official gazette. That is down from a previous estimate of 2.5%, after data showed the economy shrank in the first half of 2023.

That would mark the slowest annual growth since 2009, excluding coronavirus-dampened 2020. The Peruvian Fiscal Council warned the forecast could still be too optimistic and could see further adjustments.

Next year, Peru's economy is expected to grow 3.0%, the ministry added, down from a previous estimate of 3.4%.

The world's second-largest copper producer has taken a hit as prices of the metal fell from an average of $400/lb last year to an estimated $380/lb this year and $360/lb next year.

Though metals mining and production is expected to grow 7% this year, private investment - largely in mining - is expected to drop 4.5%, alongside a slowdown in Peru's construction and manufacturing sectors.

Peru's fishing industry is also expected to be seriously hit by warmer seas due to the El Nino climate phenomenon, the ministry said. This has devastated production of the anchovy-based fertilizer fishmeal in which Peru leads globally.

Warmer seas are also expected to bring heavy rains along the Pacific Ocean coastline, likely damaging agriculture and key infrastructure such as roads. That makes El Nino the largest immediate threat to Peru's economy, the government said.

The ministry also pegged Peru's estimated fiscal deficit for this year at 2.4% of gross domestic product (GDP), up from the 1.7% of GDP recorded last year.

Meanwhile, Peru's estimated current account deficit was lowered to 1.6% of GDP, down from the 2.1% of GDP previously expected.

Still, markets appeared largely unfazed. Peruvian stocks in dollars were up 1.16% in early afternoon trading.

Finance Minister Alex Contreras, in a press conference on Tuesday, vowed that the government was working "intensely" to reverse the trend, and that inflation was slowing, with the annual rate set to dip to 4% by year's end.

He added that companies from multiple countries including the U.S had shown interest in developing petrochemicals in Peru.

The government has repeatedly denied the country entered a recession after the two consecutive quarterly contractions this year, citing methodological nuances.

By Yoruk Bahceli

(Reuters) - A big selloff that pushed U.S. borrowing costs to 15-year highs left euro zone bonds relatively unscathed in August, reflecting investor bets the bloc's economic growth and funding needs will increasingly lag those in the United States.

A resilient U.S. economy and rising borrowing needs pushed Treasury yields to their highest in over 15 years in August amid growing expectations that interest rates would stay higher for longer. Furthermore, U.S. inflation-adjusted borrowing costs rose above 2% for the first time since 2009, hurting stocks and pushing up borrowing costs globally.

European bonds, however, were less affected and it is not hard to see why.

While the U.S. economy, which grew 2.4% last quarter, has delivered a string of positive surprises, sharp contractions in business activity last week pointed to deepening economic pain in Europe.

"In the U.S., we went from expectation of a recession at the end of the year to recent solid economic data," said Mauro Valle, head of fixed income at Generali (BIT:GASI) Investment Partners.

"In Europe, we went from a positive economic trend a couple of months ago to more negative data," Valle said.

Bond markets reflect the two regions' diverging economic fortunes and rate expectations.

Benchmark 10-year Treasury yields, though down from their highs at month-end, were still set to end August with a rise of 17 basis points, while 10-year yields have risen just 4 basis points in Germany, the euro zone's benchmark, and by 11 bps in Britain.

Last week, U.S. 10-year Treasury yields touched their highest relative to Germany's since December.

For rate-sensitive short-dated German bond yields yields are even down 17 bps in August as weak data has raised expectations of a European Central Bank rate hike pause in September. In contrast, equivalent U.S. yields are flat for the month.

"This is not a global selloff. It's a U.S.-centric selloff," said Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International, which manages $745 billion in assets. He said there was more focus now on individual economies and, for example, his firm favoured British government bonds.

DEFICIT WATCH

Crucially, borrowing needs are also diverging across the Atlantic, with U.S. fiscal outlook deteriorating and euro zone's improving.

    "Europe is not paying lip service to fiscal consolidation, it is doing fiscal consolidation," said Barclays's head of euro rates strategy Rohan Khanna.

Fitch Ratings, which stripped the U.S. of its prized AAA credit rating in early August citing fiscal pressures, expects the U.S. government deficit to rise to 6.3% of gross domestic product this year, and 6.6% next year, from 3.7% in 2022, and widen further thereafter.

In Germany, Fitch forecasts the deficit will rise to 3.1% of GDP this year from 2.6% last year, but narrow to around 1% in the longer term. Similarly it expects deficits to narrow in highly-indebted Italy and in France.

Mondher Bettaieb-Loriet, a fund manager at Vontel Asset Management, said lower debt issuance in Europe compared with the United States, would favour European government bonds over Treasuries.

Bigger fiscal deficits lead to more borrowing, resulting in higher interest rates and lower bond prices.

SPILLOVER

BofA, Goldman Sachs and Barclays expect Treasury yields to end the year slightly below current levels. Yet last week's Jackson Hole central banking symposium signalled growing concern that a strong U.S. economy could force the Federal Reserve to raise rates further than markets now expect, which would drive up borrowing costs elsewhere.

Barclays's Khanna estimates German bond yields would have been 50-60 bps lower had they only been driven by domestic factors.

For now, such effect should be welcome by the ECB, helping it fight inflation by tightening monetary conditions, said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management.

The spillover from higher Treasury yields is more challenging elsewhere.

In Japan, rising U.S. yields have pushed the yen to its lowest in almost 10 months and Japanese bond yields touched 10-year highs, triggering a recent Bank of Japan intervention.

"The higher U.S. yields push the yen weaker, which makes it difficult for the BOJ to contain yields through bond buying," said Ataru Okumura, senior rates strategist at SMBC Nikko Securities.

By Ankur Banerjee

SINGAPORE (Reuters) - Asian equities rose on Wednesday and the dollar wobbled as weak U.S. labour data bolstered bets that the Federal Reserve was likely done with its interest rate hikes, while beaten-down China stocks rose for a third straight day.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.86% to a two-week top and is on a three-day winning streak. The index though is down 6% in August and set for its worst monthly performance since February.

Japan's Nikkei was up 0.5%, while the Australia's S&P/ASX 200 index rose 0.64%.

China shares have gained this week following the announcement of measures to lift investor confidence, including halving the stock trading stamp duty, loosening margin loan rules, and putting the brakes on new listings.

In early trading, the blue-chip CSI 300 Index was 0.3% higher, while Hong Kong's Hang Seng Index rose 0.75%.

Analysts though see a need for more action from Chinese authorities to sustain the rally. "It will take more resolute policy measures and a sustainable recovery in earnings in order for the rally to last," Carlos Casanova, senior economist for Asia at UBP, said.  

Investors' focus will be on PMI data from China later this week that will highlight the state of the economy.

Overnight, Wall Street ended sharply higher, while Treasury yields slid to three-week lows after data showed U.S. job openings dropped to the lowest level in nearly 2-1/2 years in July, signalling easing labour market pressures. [.N]

"'Bad news is good news,' as the data supported bets for a sooner end of the Fed's hiking cycle despite the recent hawkish rhetoric of Fed Chair Powell," Tina Teng, markets analyst at CMC Markets (LON:CMCX), said in a note.

With the Fed highlighting that the interest rate path will be heavily dependent on data, traders are tweaking their bets based on the latest indicators.

Markets are pricing in an 89% chance of the Fed standing pat at its meeting next month, the CME FedWatch tool showed, and are now pricing in a 50% chance of another pause at the November meeting compared with a 38% chance a day earlier.

A much clearer economic picture will likely be revealed later in the week when U.S. payrolls and personal consumption expenditure reports are due.

U.S. Treasury yields were stable in Asian hours. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 1.3 basis points at 4.903%, easing away from the three week low of 4.871% it touched on Tuesday. [US/]

The drop in yields put pressure on a buoyant dollar. [FRX/] Against a basket of currencies, the dollar inched up 0.029% to 103.58 after slipping nearly 0.4% on Tuesday.

The yen weakened 0.15% to 146.09 per dollar and remained at levels that led to intervention in the currency market last year by Japanese authorities.

The Australian dollar fell 0.32% to $0.646 after data showed Australian consumer price inflation slowed to a 17-month low in July, signalling that interest rates might not have to rise again.

U.S. crude rose 0.32% to $81.42 per barrel and Brent was at $85.69, up 0.23%. Both benchmarks rallied more than a dollar a barrel on Tuesday on a soft dollar. [O/R]

Traders will be closely watching cocoa prices on Wednesday after the London cocoa futures on ICE rose to a 46-year high on Tuesday, buoyed by tightening supplies.

Top cryptocurrency bitcoin eased a bit in early Asian hours to trade at $27,554 after rising 7% on Tuesday. A federal appeals court ruled on Tuesday that the U.S. securities regulator was wrong to reject an application from Grayscale Investments to create a spot bitcoin exchange-traded fund.

NEW YORK/LONDON (Reuters) - Bitcoin rose to two-week highs on Tuesday after a U.S. court ruled that the Securities and Exchange Commission (SEC) should not have rejected digital asset manager Grayscale's application for a spot bitcoin exchange traded fund.

It was last up nearly 7% at $27,910

The SEC's denial of Grayscale's proposal was arbitrary and capricious because the regulator failed to explain the different treatment between bitcoin futures ETFs and spot bitcoin ETFs, said a panel of judges in the District of Columbia Court of Appeals in Washington.

"Despite the inevitable SEC appeal, to our mind there is no doubt now, spot BTC ETFs are coming to the US. We don't believe the SEC will act as kingmaker and the most likely outcome is a block approval of applications that meet requirements, probably in Q1 2024," said Tim Bevan, chief executive officer at ETC Group, crypto exchange-traded product provider.

He also expects pent up U.S. demand to positively impact bitcoin prices and help global acknowledgement of crypto as a new asset class.

The regulator did not immediately respond to requests for comment on Tuesday.

Both parties have 45 days to appeal the ruling, in which case it would either go to the U.S. Supreme Court or an en banc panel review. It is unclear if the SEC will appeal.

The SEC last year rejected Grayscale's application for a spot bitcoin ETF, arguing the proposal did not meet anti-fraud and investor protection standards. It cited the same reason in denying dozens of other applications for similar products, including those from Fidelity and VanEck.

Ether, the second largest cryptocurrency in terms of market capitalization, was also up, rising about 5% to $1,730.50.. Earlier, it hit a two-week peak as well of $1,735.60.

Bitcoin and ether have been in a recent slump, caught up in a broad risk-off move due in part to expectations that the Federal Reserve will keep interest rates higher for longer amid persistently elevated inflation.

So far this month and despite Tuesday's sharp gains, both bitcoin and ether were down 6% and nearly 8%, respectively.