SEOUL (Reuters) - South Korea's financial authorities said they would control household debt by tightening certain loan regulations, as rising mortgage demand drove up household borrowing by the biggest amount in two years in August.

Total household borrowing from banks stood at 1,075.0 trillion won ($810.94 billion) at the end of August, up 6.9 trillion won over the month, central bank data showed on Wednesday.

It exceeded the previous month's 5.9 trillion won increase and the biggest since July 2021, according to the Bank of Korea. Household borrowing has been rising since April.

The country's financial regulator held a meeting on Wednesday with related ministries and agencies to discuss ways to prevent further expansion of household debt, it said in a statement.

The Financial Services Commission said it would introduce measures against misuses of long-term mortgage loans, a stricter debt-to-service ratio for loans on floating rates, and tighter qualification criteria for the government's temporary policy mortgage loan.

In August, mortgage loans grew for a fifth straight month and by 7.0 trillion won, the biggest since February 2020, while other loans fell by 0.1 trillion won in their 21st month of decline.

South Korea's central bank held interest rates steady for a fifth straight meeting in August, as it tries to balance softer inflation with heightened risks to economic growth. Bank of Korea Governor Rhee Chang-yong said rate hikes would remain a secondary option for dealing with rising household debt.

($1 = 1,325.6300 won)

By Leika Kihara

TOKYO (Reuters) -Japan's annual wholesale inflation slowed in August for the eighth straight month, data showed on Wednesday, offering some relief for households and retailers hit by past sharp rises in raw material imports.

The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, rose 3.2% in August from a year earlier, matching a median market forecast.

It slowed from a revised 3.4% rise in July, and is now off a peak 10.6% year-on-year surge hit in December last year, data by the Bank of Japan (BOJ) showed.

"While crude oil prices remain high and yen falls continue, wholesale inflation is slowing ... and could post a year-on-year decline in the fourth quarter," said Toru Suehiro, an economist at Daiwa Securities.

"The price declines seen for some goods can't be ignored" as it could affect households' perception of future price moves, he added.

Rising wholesale prices, driven by last year's surge in global commodity costs and the weak yen, have pushed up Japan's broader consumer inflation by prodding many firms to charge households more for their goods.

While consumer inflation has remained above the BOJ's 2% target for more than a year, the central bank has stressed the need to keep ultra-loose monetary policy until such supply-driven rise in prices is replaced by an increase backed by domestic demand.

By Saeed Azhar and Lananh Nguyen

NEW YORK (Reuters) -Goldman Sachs CEO David Solomon said the U.S. economy is likely to avoid a significant recession, but warned that inflation will likely be more persistent than market participants currently expect.

"The chance of having a relatively soft landing and navigating through this has gone up very meaningfully over the last 12 months," Solomon told Reuters in an interview on Tuesday. "The environment is definitely better."

The Federal Reserve has tamed inflation via interest rate increases, but it may need to take further action, he said.

"I have a personal point of view that inflation is going to be a little bit more sticky than the more optimistic views," Solomon said. "There's still work to do."

The current trajectory of the U.S. Treasuries' forward curve shows rates declining in the future, but Solomon cautioned that might not materialize.

"You have to recognize it's still very uncertain," he said.

Fed funds futures traders largely show the Fed will keep rates on hold until May or June next year, when traders expect the central bank will start cutting rates.

Still, optimism that the U.S. economy will avoid a recession is leading to a reopening of capital markets, Solomon said.

"You’re seeing now this month a bunch of significant IPOs in the market," said Solomon, who noted that Goldman was involved in most of the initial public offerings. "They're meaningful, they're going well," he said.

Arm, the chip designer owned by SoftBank (TYO:9984) Group Corp, is close to raising about $5.4 billion in New York in what might be the biggest IPO of 2023. The IPO will price on Wednesday.

Mergers and acquisitions likely will be slower to resume because uncertainty weighs on companies making strategic decisions.

"People are starting to open up to a better environment and think a little bit more forward strategically, but there's a lag time," Solomon said.

Solomon criticized U.S. proposals that would raise capital requirements for larger banks, echoing comments from his counterparts.

Michael Barr, the Federal Reserve's top regulatory official, told Congress in May that the central bank would unveil its plan to ratchet up capital rules for banks this summer and ensure supervisors more aggressively police lenders following regional bank failures earlier this year that required the government intervention.

"I do think these capital rules will have an impact on economic growth and that will affect large businesses and small businesses and their access to capital," Solomon said. "It'll push some activity out of the banking system if they're implemented."

JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon blasted the proposed rules, telling investors on Monday that they could prompt lenders to pull back and stymie economic growth.

If implemented, the regulations could increase Goldman's capital requirements by slightly more than 25%, Solomon told an investor conference later Tuesday.

The bank will take more writedowns on its commercial real estate portfolio in the third quarter, but amount will be lower than in the second quarter, when CRE weighed on its earnings.

Solomon also spoke about departures of senior bankers, citing historic instances of turmoil when Goldman combined or reshuffled businesses.

"Whenever you put businesses together, there's going to be disruption and there's going to be volatility," he said.

Goldman Sachs has seen several exits since it reorganized into three units last year and scaled back ambitions for its consumer business, which has lost $3 billion in the last three years.

By Andy Bruce and David Milliken

LONDON (Reuters) -Britain's labour market showed more signs of cooling in the three months through July, even as data showing another month of strong pay growth left the Bank of England (BoE) on track for a further interest rate hike next month.

The unemployment rate rose, the number of people in work fell sharply and vacancies dipped below 1 million for the first time in two years, the Office for National Statistics (ONS) said on Tuesday.

It was another record month for pay growth, however - which most investors think will prompt the BoE to raise interest rates again on Sept. 22 to 5.5% from 5.25%, perhaps for the last time in the current cycle.

"The bigger question is about the path thereafter," said Hugh Gimber, global market strategist at J.P. Morgan Asset Management.

"The Bank will be reluctant to keep tightening if they've watched other central banks around the world hit pause. Yet if incoming data doesn't turn definitively, another hike to a terminal rate of 5.75% is absolutely on the table."

Last week BoE Governor Andrew Bailey said the central bank is "much nearer" to ending its run of rate increases but borrowing costs might still have further to rise because of stubborn inflation pressures.

The unemployment rate rose to 4.3% in the three months to July from 4.2% a month earlier, its highest since the three months to the end of September 2021, the ONS said.

The jobless rate is already higher than the 4.1% the BoE had pencilled in for the third quarter as a whole, when it published its last set of forecasts in early August.

Employment dropped by a greater-than-expected 207,000 in the three months to July, the biggest such fall since the three months to October 2020, the data showed.

Wages continued to rise quickly, and above the rate of inflation. Pay packets excluding bonuses were 7.8% higher than a year earlier - the joint-fastest rate since ONS records began in 2001 and in line with economists' forecasts in a Reuters poll.

Including bonuses, pay rose by 8.5% compared with the 8.2% consensus, boosted in part by backdated pay for healthcare workers. Adjusting for consumer price inflation it grew 0.6% - the first positive number since March 2022.

While good news for workers, the level of pay in real terms remains no better than it was more than 15 years ago - a historically dismal record.

"Wage growth remains high, partly reflecting one-off payments to public sector workers, but for real wages to grow sustainably we must stick to our plan to halve inflation," finance minister Jeremy Hunt said.

The pound showed little reaction to the data.

By Leika Kihara

TOKYO (Reuters) - The Bank of Japan is under pressure to defend a new cap for long-term interest rates set just six weeks ago, as Governor Kazuo Ueda's hawkish remarks heightened market expectations of a near-term end to its negative interest rate policy.

In an interview on Saturday, Ueda said the BOJ could have enough data by year-end to determine whether it can end negative rates, shocking markets that did not see such a move as imminent.

Below are the tools the BOJ is expected to use to combat sharp rises in bond yields, what happens next on monetary policy and factors that could determine the timing of a rate hike:

WHAT WOULD TRIGGER BOJ ACTION IN THE JGB MARKET?

After its forceful defence of a 0.5% cap drew criticism for distorting markets and fuelling an unwelcome yen fall, the BOJ tweaked its yield control policy in July to allow the 10-year Japanese government bond (JGB) yield to rise by up to 1%.

Ueda had described the 1% limit as a protective cap that likely won't be hit any time soon given a fragile economy. But his hawkish remarks have pushed up the 10-year JGB yield to a near decade-high of 0.715% on Tuesday.

The BOJ will mainly focus on the speed of moves and step in, mainly through emergency bond buying operations, to curb sharp rises in yields, say sources familiar with its thinking. It also likely sees 0.8% as a threshold it wants to defend to avoid the 10-year yield from reaching 1%.

WHAT ABOUT OTHER ZONES OF THE YIELD CURVE?

The BOJ is also keen to prevent any sharp rise in yields for short- and medium-term notes, as they have a big impact on corporate borrowing costs.

To curb rises in the shorter end of the yield curve, it will offer two- or five-year loans against collateral to banks, a move aimed at encouraging investors to buy five-year bonds with loans carrying lower rates.

WHAT ARE KEY DATA AVAILABLE TOWARDS YEAR-END?

Inflation hit 3.1% in July, exceeding the BOJ's 2% target for the 16th straight month. But the bank sees the increase as driven mostly by supply factors such as import costs, and wants more assurances that Japan will sustain 2% inflation underpinned by consumption.

The outlook of next year's wages is therefore key. Japanese firms traditionally kick off their annual wage negotiations with unions in March. But some clues will be available this year.

Japan's largest labour organisation Rengo will lay out in early December its target for next year's wage hike, which will set the standard for wage talks between management and unions.

The BOJ will also scrutinise economic data and corporate earnings for clues on whether Japan's recovery is strong enough to weather the hit from slowing global demand.

WHAT WILL HAPPEN NEXT?

If the BOJ is convinced Japan can sustain 2% demand-driven inflation, the next step is to ditch or hike a 0% target set for the 10-year bond yield, and raise short-term rates to zero from -0.1%.

There is no consensus within the BOJ on when and in what order it would dismantle the complex framework crafted under former Governor Haruhiko Kuroda. The bank's staff is brainstorming various ideas that will be brought to the board for debate once conditions fall in place to exit ultra-loose policy.

Given Japan's dire fiscal state, the priority would be to avoid an abrupt, sharp rise in long-term rates that boosts the cost of financing the country's huge debt.

That could mean the BOJ will retain the yield cap as a precaution when it raises short-term rates, some analysts say.

WHEN WOULD BOJ NEXT SEND SIGNALS?

There are no scheduled public appearances of BOJ executives until governor Ueda's regular news conference, to be held after the BOJ's next two-day policy meeting ending on Sept. 22.

Japan's August consumer price data is also due on Sept. 22.

By Vivek Mishra

BENGALURU (Reuters) - China's economy will grow less than previously thought this year and next as a struggling property market dogs what was once the world's growth engine, according to a Reuters poll of economists who said the risks were skewed to further downgrades.

The world's second-largest economy has been struggling after a brief post-COVID recovery, dragged by huge debt due to decades of infrastructure investment and a property downturn, posing risks not only to itself but also to the global economy.

With 70% of household wealth tied up in the ailing property market, coupled with rising youth unemployment, weak consumption demand and the reluctance by depressed private firms to invest, policymakers have been fighting an uphill job in reviving growth.

"The primary culprit is the property sector. This source of growth has now evaporated and won't be coming back," said Julian Evans-Pritchard, head of China economics at Capital Economics in Singapore.

"We have long been more bearish than most...but even we have been surprised by the speed at which growth has declined. The deceleration probably still has further to run."

The Sept. 4-11 Reuters poll of 76 analysts, based in and outside mainland China, predicted the economy would grow 5.0% this year, lower than 5.5% forecast in a July survey. Forecasts ranged between 4.5% and 5.5%.

While nearly all economists lowered their growth outlook for this year and next compared with the previous survey, the magnitude of those cuts was still marginal, leaving room for more downgrades.

Some economists cautioned the government's growth target of around 5% for this year could be missed as the drip-feed of policy stimulus from Beijing would not be enough to stabilise the economy.

While recent data showed signs of improvement in the economy, some economists said more policy support was needed for the ailing property sector. The sector accounts for roughly a quarter of China's economy.

Growth was forecast to slow to 4.5% next year and 4.3% in 2025. After expanding 6.3% last quarter, the economy was expected to grow just 4.2% this quarter, followed by 4.9% in the next, and down to just 3.9% in the first quarter of 2024.

"This slowdown could be just the tip of the iceberg," said Bingnan Ye, senior economist at China Merchants Bank International in Hong Kong, who added the downside risk was "household consumption may improve more slowly than many expect."

"Along with a slowdown in the property sector and exports, we still have U.S.-China trade tensions, and the recent diversification of supply chains beyond China will add to the downside pressure."

A strong majority of economists who answered an additional question said the risks to their 2023 and 2024 GDP growth forecasts were skewed to the downside.

Economists also cut their consumer price inflation forecast to 0.6% for this year and 1.9% for next year, down from the previously expected 1.1% and 2.1% in the July survey.

Despite low inflation, the People's Bank of China was expected to keep its key interest rates on hold this year.

Asked whether there would be an aggressive economic stimulus package from authorities, over three-quarters of economists, 17 of 21, said no.

"Local governments, which are responsible for (about) 85% of expenditures, are heavily indebted. This constrains the ability...to provide meaningful stimulus without further undermining their already fragile finances," said Teeuwe Mevissen, senior macro strategist at Rabobank in the Netherlands.

(For other stories from the Reuters global economic poll:)

By David Morgan

WASHINGTON (Reuters) - The U.S. House of Representatives returns this week for an expected political brawl over spending cuts and impeachment that could paralyze the Republican-controlled chamber, as Congress struggles to avoid a government shutdown.

The House and the Democratic-controlled Senate are due to be in session for about 12 days before funding expires on Sept. 30, leaving little time to agree on a package of 12 appropriations bills that can pass each chamber and win Democratic President Joe Biden's signature.

The main bone of contention among House Republicans is a demand by roughly three-dozen members of the hardline House Freedom Caucus to cut spending for fiscal 2024 to $1.47 trillion -- about $120 billion less than Biden and Republican House Speaker Kevin McCarthy agreed in May.

The White House and Senate leaders -- including top Republican Mitch McConnell -- have rejected that demand.

That dispute and other hardline demands, including opposition to Ukraine aid and calls for an impeachment inquiry against Biden, could imperil efforts to pass a short-term stopgap, known as a continuing resolution or "CR," which would keep federal agencies afloat while lawmakers debate full-scale appropriations.

"Everything's coming to a head after a long recess," Republican Representative Kelly Armstrong told Reuters, referring to the six-week-long House summer break that ends Tuesday. "We're a pretty diverse caucus, with a five-vote majority. So, threading the needle is something that's really difficult to do."

McCarthy's eight-month-old speakership could be threatened if he seeks Democratic support to avoid a shutdown or fails to move forward with an impeachment inquiry that former President Donald Trump's House allies are seeking despite a lack of votes.

Political brinkmanship over the debt ceiling has already prompted the Fitch rating agency to downgrade U.S. debt to AA+ from its top-notch AAA designation, partly because of repeated down-to-the-wire negotiations that threaten the government's ability to pay its bills.

White House spokesperson Andrew Bates warned that failure to enact $24 billion in supplemental funding for Ukraine and $16 billion for disaster-stricken U.S. communities in states including Hawaii and Florida could put lives at risk, while delaying money to combat the deadly opioid fentanyl.

SOME PREFER SHUTDOWN

Hardline Republicans want offsets for spending on disaster relief and Ukraine aid included in any CR, as well as tighter immigration and border security policies.

"Without these spending cuts, we're a 'no' vote. I say 'we' - me and a good many others," Representative Ralph Norman, a Freedom Caucus member, said in an interview. "I'd rather shut the government down."

That could mean trouble for McCarthy's hopes of restarting action on spending legislation this week with an $886 billion defense appropriations bill.

The House, which Republicans control by a thin 222-212 majority, has passed only one appropriations bill so far.

The Senate plans to move forward on Monday with bipartisan bills. Senators of both parties hope floor action will give them the upper hand in negotiations with the House.

House hardliners vehemently reject a proposal to lump border security and Ukraine aid in a separate measure.

"We're going to have to see some significant win for the American people," Freedom Caucus Chairman Scott Perry told Reuters. "We've been abundantly clear, transparent and precise about how you get votes out of members in the Freedom Caucus."

Hardliners, who forced McCarthy to endure 15 floor votes before he became speaker in January, shut down the House floor in June to protest his spending deal with Biden.

Their demands have irked more centrist Republicans.

With the Senate and White House in Democratic hands, Representative Don Bacon said House Republicans should accept the higher spending level set by the McCarthy-Biden agreement and adopt a relatively clean CR.

"There's no reason to do a shutdown when you already have a bipartisan agreement," Bacon told Reuters. "I know that 20 or 30 people don't like it. But they don't represent the whole House and they don't represent the whole country."

Firebrand Representative Marjorie Taylor Greene vowed not to support funding measures unless the House votes to begin an inquiry on unproven allegations that Biden was involved in his son Hunter's overseas business dealings while vice president. Biden and the White House deny the claims.

Other Republicans reject the idea of tying an impeachment inquiry to the spending debate.

Democrats have dismissed impeachment talk as little more than an effort to distract from Trump's extensive legal woes.

" ... Until you have the votes, it seems kind of silly," Democratic Senator John Fetterman told reporters.

By Jamie McGeever

ORLANDO, Florida (Reuters) -Hedge funds' bearish view on the dollar is evaporating fast and at the current pace of buying they will be outright bullish by the end of the month.

What's more, recent history suggests that when funds go long dollars, they tend to stay long for a while. 'Longer for longer', if you like.

The latest Commodity Futures Trading Commission (CFTC) data shows that funds cut their net short dollar position to $7.17 billion, the smallest bet against the dollar since mid-June and a third of what it was six weeks ago.

It has halved in the last two weeks, and at the current pace the speculative community will be net long of dollars by the end of the month. This shift has coincided with the dollar's rise to a six-month high against a basket of currencies.

A short position is essentially a wager an asset's price will fall, and a long position is a bet it will rise. Hedge funds often take directional bets on currencies, hoping to get on the right side of long-term trends.

This is broadly reflected in CFTC positioning cycles.

From May 2013 - when former Fed chief Ben Bernanke uttered his famous 'taper tantrum' remark - funds went net long dollars for an almost uninterrupted four-year stretch through June 2017, a bullish bet that peaked at a record $51 billion in late 2014.

That was followed by a year being net short dollars, nearly two years of being net long, before swinging back to being net long for over a year. Funds have been net short of dollars since November last year.

This suggests that although the dollar's short-covering rally may not have much juice left in it, the greenback could find a solid source of long-term demand once the speculative community decides to turn outright bullish.

Whether funds do will hinge largely on the interest rate outlook.

There is a growing view that the Federal Reserve's hiking cycle is over, which is intuitively negative for the dollar. But what matters is relative moves - changes in yields relative to current market pricing, and relative to other jurisdictions.

And that is a mixed picture, especially given the latest developments in Japan.

The two-year U.S.-Japanese yield spread remains around 500 basis points in favor of the dollar, around the widest level in over 20 years. A quicker tightening shift from the Bank of Japan than is currently priced in could move that dial rapidly.

CFTC data show that funds are still holding a substantial net short yen position worth around $8.2 bln. Given that funds have been net short the Japanese currency since March 2021, there is potential for the yen to snap sharply higher.

On the other hand, although CFTC funds cut their net long euro position to a seven-month low of 136,000 contracts, that is still a large $18 billion bet that the euro will appreciate.

If the European Central Bank brings its rate-hiking cycle to a premature end - not an unreasonable assumption as growth forecasts are slashed and Germany is seen falling into recession - there is plenty of scope for funds to liquidate their euro longs.

(The opinions expressed here are those of the author, a columnist for Reuters.)

By Amruta Khandekar and Shubham Batra

(Reuters) -European shares hit a one-week high on Monday, buoyed by data indicating signs of stabilisation in the Chinese economy, while traders braced for a busy week with the crucial U.S. inflation print and European Central Bank (ECB) policy meeting in focus.

The pan-European STOXX 600 index gained the most in two weeks, rising 0.6%, after shedding nearly 1% last week amid worries about higher-for-longer U.S. interest rates.

Italian stocks led the gains among European markets, climbing 0.8%, while UK's FTSE 100 rose 0.4%.

Among sectors, the mining index jumped 2.4% as prices of metals rose on prospects of better demand from top consumer China. [MET/L]

Positive inflation data and more stimulus measures from Beijing added to signs that the world's second-largest economy was stabilising.

Investors are now awaiting the U.S. inflation data on Wednesday that would set the direction for global interest rates, while money market participants see a 60% chance that the ECB would keep its interest rates steady on Thursday, according to LSEG data.

"Our economists have nervously held their 3.75% terminal deposit rate call for many months now, and as such they think the ECB will stay on hold," said Deutsche Bank strategists in a note.

"However, even if they don't hike this week, don't expect any sign that the council are confident that this is the last hike. A lot of uncertainty remains over European inflation, whilst GDP has been in near-stagnation since last autumn."

Investors will also closely monitor commentary from ECB officials through the week to cement bets on the central bank's interest rate trajectory.

Among individual stocks, Covestro rose 3.2% after the German chemicals firm on Friday entered into open-ended discussions with suitor Abu Dhabi National Oil Company (ADNOC) over a takeover approach.

Vistry Group led the gains among individual stocks, jumping 13.3%, after the British homebuilder said it would merge its affordable-housing business 'Partnerships' with its Housebuilding operations.

Alfa Laval fell 2.6% after Citi cut the Swedish engineering group's rating to "Neutral" from "Buy", saying it expected a slowdown in order growth to hit earnings.

Ratings agency Fitch will review Germany's long-term credit rating on Friday. The agency currently assigns an 'AAA' rating with stable outlook to Europe's largest economy.

BEIJING (Reuters) - Two major cities in eastern China lifted all curbs on home purchases and selling on Monday, joining several other cities in dropping restrictions to attract buyers and revive a largely frozen property market.

Jinan and Qingdao, two of the largest cities in China's second-most populous province of Shandong, said homes in all areas are allowed to be put on the market, according to a government statement and a local media report.

Qingdao previously limited the number of homes that could be purchased in two districts. Jinan had similar measures.

Last week, three cities - Nanjing in eastern Jiangsu province and Dalian and Shenyang in northeastern Liaoning province - became the first cities to eliminate curbs on home buying.

The moves were part of broader support measures for the sluggish property market, which accounts for a quarter of China's economy. The measures include cuts in interest rates on existing mortgages.

China's property sector has been in a tailspin since 2021 when the government issued strict rules to stop indebted developers from accumulating even more debt.

A sector-wide liquidity crunch followed, slowing down the completion of projects, weighing on home-buyer sentiment and depressing prices.