CBy Jihoon Lee

SEOUL (Reuters) -South Korea's export growth slowed to a seven-month low in October, missing market expectations, in a sign of cooling global demand that puts further pressure on a stuttering economic recovery.

Outbound shipments from Asia's fourth-largest economy rose 4.6% from a year earlier to $57.52 billion, compared with gains of 7.5% the month before and slowing for the third month, official data on Friday showed. A Reuters poll of economists had tipped a 6.9% rise.

It was the 13th straight month exports grew in annual terms though they were the smallest increase since March.

On average per working day, exports were down 0.2%, their first fall since September 2023.

The trade data aligns with a survey showing South Korea's factory activity shrank for a second month in October, with output falling by the most in 16 months.

The trade-reliant economy barely grew in the third quarter, despite signs of recovery in consumer spending, as exports weakened, raising the chance for more stimulus to support growth.

Exports of semiconductors were up 40.3% to $12.5 billion in October, which was lower than an all-time high of $13.6 billion in September. Sales of cars rose 5.5%.

By destination, shipments to China rose 10.9% to a 25-month high of $12.2 billion. Those to the United States and European Union were up 3.4% and 5.7%, respectively.

Imports rose 1.7% to $54.35 billion in October, after gaining 2.2% in September, also weaker than a 2.0% rise expected by economists.

The country posted a monthly trade surplus of $3.17 billion, narrower than the previous month's $6.66 billion.

By Ann Saphir

(Reuters) -With inflation now only just above the Federal Reserve's 2% target and wage pressures easing, U.S. central bankers are widely expected to cut short-term borrowing costs next week in an effort to keep the labor market from further cooling.

But an uptick in underlying price pressures evident in data released on Thursday, what's likely to be a confusing monthly read on the labor market on Friday, and uncertainty over the outcome of the Nov. 5 U.S. presidential election make the road for further interest rate reductions in December and especially next year less clear.

Inflation by the Fed's targeted measure, the year-over-year increase in the personal consumption expenditures price index, dropped to 2.1% in September, from 2.3% in August, a Commerce Department report on Thursday showed. The Fed aims for 2% inflation.

A separate report from the Labor Department showed the broad wage-growth gauge known as the employment cost index rose 0.8% in the third quarter from the previous quarter, the smallest increase since the second quarter of 2021.

A rise in labor costs was among the factors that had alarmed Fed policymakers in late 2021, prompting the central bank's pivot to tighter policy to head off an upward spiral of rising wages and prices.

The fact that wage growth eased last quarter even as the economy expanded solidly may give Fed policymakers added confidence that inflation won't resurge, and a green light for interest rate cuts in their last two meetings of the year.

"We view the data overall as suggesting that upside inflation risks from a strong economy and labor market remain to date muted, and while the Fed and investors will need to keep this under ongoing review given the strength in the data, it is fundamentally constructive for risk and for the 'soft landing,'" Evercore ISI Vice Chairman Krishna Guha wrote in a note.

A soft landing refers to a scenario in which inflation cools but the labor market remains healthy and the economy avoids recession, a historically rare occurrence but one that so far has played out.

Futures contracts settling to the Fed's policy rate ratified that view, putting the chances of a 25-basis-point cut at the central bank's Nov. 6-7 meeting at about 94%, and giving a second 25-basis-point cut in December about a 70% chance.

The Fed last month lowered its policy rate by half of a percentage point to the 4.75%-5.00% range, in large part because policymakers felt that keeping it high even as inflation was falling could harm employment. 

ELECTION IMPACT

The release on Friday of the Labor Department's monthly employment report is likely to show the unemployment rate held steady at 4.1% in October, economists polled by Reuters projected. They forecast that 113,000 jobs were added in October, which would be a sharp slowdown from September.

Fed policymakers, however, are expected to take little signal from that employment data, because recent hurricanes and an ongoing strike at Boeing (NYSE:BA) likely subtracted as much as 100,000 jobs in the month. That impact will be seen as only temporary rather than a sudden deterioration in the labor market.

Other data released on Thursday, however, may mitigate the confidence in a benign inflation trajectory.

Underlying price pressures, as tracked by the core PCE price index that excludes volatile food and energy items, ticked up to 2.7% from a year earlier, higher than the 2.6% economists had expected and matching the prior month's increase. The Fed watches core PCE closely to help forecast where inflation is heading, and further increases could raise doubts about the wisdom of easing monetary policy further.

"We believe the Fed will pause any rate cuts in December amid fears about a reacceleration of inflation," Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management, wrote in a note.

And if former U.S. President Donald Trump retakes the White House and voters return full control of Congress to his fellow Republicans on Tuesday, as betting markets project, promised tariff increases, tax cuts and mass deportations of migrants could bolster wage and inflation pressures, analysts say.

Financial markets in recent weeks have been pricing in higher inflation in five years.

"The election poses upside risks to the baseline forecast for medium-term wage growth," Bernard Yaros, lead U.S. economist at Oxford Economics, wrote in a note.

(Reuters) - Japanese investors sold overseas assets for a third straight week through Oct. 26, cashing in on the yen's sharp decline amid U.S. election uncertainties and reduced expectations of big Federal Reserve rate cuts.

According to the Ministry of Finance data, Japanese investors sold foreign stocks and long-term bonds worth a net 397.6 billion yen and 889.6 billion yen ($5.81 billion), respectively, posting their third straight weekly net sales in both segments. They, however, added a net 116.5 billion yen worth of short-term bills.

While the yen rallied in the September quarter, prompting Japanese investors to acquire foreign assets, it has lost about 6.4% against the dollar this month, creating profit-taking opportunities for Japanese market participants.

The yen reached a three-month low this week after the ruling coalition lost its parliamentary majority, and is on track for its seventh sharpest monthly decline ever and the largest since November 2016.

Last quarter, Japanese investors bought approximately 2.02 trillion yen in stocks and 5.11 trillion yen in long-term bonds. However, they have sold around 667 billion yen in equities and 1.19 trillion yen in long-term debt securities so far this month.

In parallel, foreign net purchases of Japanese stocks fell to a five-week low of 8 billion yen last week, as investors exercised caution due to the election in Japan.

Foreigners, meanwhile, snapped up a net 277.9 billion yen worth of long-term Japanese bonds, registering their fourth weekly net purchase in five. They, however, sold 682.6 billion yen worth of short-term instruments.

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) -The U.S. Treasury Department said on Wednesday it does not anticipate increasing auction sizes for notes and bonds for at least the next several quarters, in line with market expectations, as it announced a $125 billion refunding from November 2024 to January 2025.

The department will refund about $116.4 billion of privately held Treasury notes and bonds maturing on Nov. 15 to raise new cash of $8.6 billion from private investors.

The Treasury will sell $58 billion in U.S. three-year notes, $42 billion in 10-year notes, and $25 billion in 30-year bonds next week. These were the same auction sizes for the same securities announced at the July refunding.

"The refunding was pretty much close to our expectations. There could have been a small tweak to the guidance because 'at least for the next several quarters' is quite open to interpretation," said Angelo Manolatos, a macro strategist at Wells Fargo Securities.

"To us, we think that the Treasury is well-funded to meet its borrowing needs and current auction sizes are sufficient until November 2025, a time when we think the Treasury can increase them."

The U.S. Treasury said on Monday it plans to borrow $546 billion in the fourth quarter, $19 billion less than the July estimate, and another $823 billion in the first quarter of 2025. It assumes an end-December cash balance of $700 billion and an end-March cash balance of $850 billion.

Treasury Assistant Secretary for Financial Markets Joshua Frost, in a briefing following the refunding statement, said the borrowing plans for the quarter assume that Congress approves a "timely" increase or suspension in the debt ceiling. The current extension, approved in June 2023, expires on Dec. 31.

Members of the Treasury Borrowing Advisory Committee (TBAC), who met with the U.S. Treasury before the refunding announcement, expressed concern about the borrowings for 2025 and 2026. Minutes of the meeting showed that primary dealer estimates for the next two fiscal years were marginally higher than the previous forecasts.

The Treasury said on Wednesday it believes current auction sizes leave it "well-positioned" to address potential changes to the fiscal outlook and to the pace and duration of future redemptions in the Federal Reserve System Open Market Account (SOMA).

The account is managed by the U.S. central bank and contains assets acquired through operations in the open market.

The Treasury said it intends to address potential changes to the fiscal outlook in borrowing needs over the next quarter through changes in regular bill auction sizes and cash management bills.

TIPS AUCTION SIZES TO INCREASE

Auction sizes will moderately increase for Treasury Inflation-Protected Securities, the Treasury said.

"Given the intermediate- to long-term borrowing outlook and the structural balance of supply and demand for TIPS, Treasury believes it would be prudent to continue with incremental increases to TIPS auction sizes in order to maintain a stable share of TIPS as a percentage of total marketable debt outstanding."

The Treasury plans to maintain the November 10-year TIPS reopening auction size at $17 billion, increase the December five-year TIPS reopening auction size by $1 billion to $22 billion, and raise the January 10-year TIPS new issue auction size by $1 billion to $20 billion.

This was the overwhelming recommendation of primary dealers, the TBAC minutes showed. While demand for TIPS, especially from retail investors, had weakened as inflation has cooled, almost all dealers felt the market could absorb additional supply, the minutes added.

By Hyunjoo Jin and Heekyong Yang

SEOUL (Reuters) -Samsung Electronics said it would focus on producing high-end chips to improve profitability after reporting a 40% quarter-on-quarter plunge in chip profit, in a stark contrast with rivals TSMC and SK Hynix that posted record earnings on the AI boom.

The world's biggest maker of memory chips, smartphones and TVs also warned on Thursday of limited earnings growth in the current quarter due to intensifying competition in the consumer electronics segment during the peak year-end demand season.

"In the fourth quarter, while memory (chip) demand for mobile and PC may encounter softness, growth in AI will keep demand at robust levels," Samsung said in an earnings statement.

"Against this backdrop, the Company will concentrate on driving sales of High Bandwidth (NASDAQ:BAND) Memory (HBM) and high-density products," it said, referring to premium memory chips used to make AI chipsets like those produced by industry leader Nvidia (NASDAQ:NVDA).

Samsung posted an operating profit of 9.2 trillion won ($6.66 billion) in the July to September period, compared with 2.4 trillion won a year earlier and 10.4 trillion won the previous quarter.

The third-quarter result was slightly above Samsung's preliminary estimate of 9.1 trillion won flagged earlier this month, which was below market expectations at the time. Shares fell 0.2% in early trading on Thursday, with the wider South Korean market down 1.3%.

"Samsung Electronics (KS:005930) hasn't commercialised HBM as effectively as its competitors, so its third-quarter performance and fourth-quarter outlook are falling short of market expectations," said Baik Gil-hyun, analyst at Yuanta Securities.

BEIJING (Reuters) -China's manufacturing activity in October expanded for the first time in six months, an official factory survey showed on Thursday, supporting policymakers' optimism that recent fresh stimulus will get the world's No. 2 economy back on track.

The official purchasing managers' index (PMI) rose to 50.1 in October from 49.8 in September, just above the 50-mark separating growth from contraction and beating a median forecast of 49.9 in a Reuters poll.

In a further encouraging sign, the non-manufacturing PMI, which includes construction and services, rose to 50.2 this month, after it dropped to 50.0 in September.

Policymakers are banking that further financial stimulus announced in late September will stabilise China's $19 trillion economy and kick lending and investment back into gear, as a sharp property market downturn and frail consumer confidence continue to deter investors.

The mood in the manufacturing sector has been depressed for months by tumbling producer prices and dwindling orders. Furthermore, China's exports, a lone bright spot, faded last month and the economy grew at the slowest pace since early 2023 in the third quarter.

Still, officials are publicly optimistic that this latest tranche of policy support will soon start to make itself felt.

China economists have previously pointed to how sentiment-based surveys often present a gloomier picture than hard data indicators. In the poll, one-in-three respondents forecast factory activity broke back into expansion this month.

In a worrying sign, however, industrial profits recorded the steepest monthly decline of the year in September, data showed on Sunday. The National Bureau of Statistics said that was due to factors such as insufficient demand.

Other recent indicators pointed to increased deflationary pressures and subdued loan demand, raising further red flags over the economic recovery and strengthening the case for even more stimulus to galvanise growth.

China is considering approving next week the issuance of over 10 trillion yuan ($1.40 trillion) in extra debt in the next few years, Reuters reported on Tuesday.

($1 = 7.1301 Chinese yuan)

By David Milliken and Sachin Ravikumar

LONDON (Reuters) - Britain's new finance minister Rachel Reeves announced the biggest tax increases in three decades in her first budget on Wednesday, accusing the former Conservative government of breaking the country's public services.

Businesses and the wealthy were set to bear the brunt of the tax hikes and Reeves also paved the way for higher borrowing for investment to speed up Britain's economy, which has been slowed by the 2007-09 global financial crisis, Brexit, COVID and soaring energy prices.

The former Bank of England economist - who said she was proud to be the first female Chancellor of the Exchequer - stressed there would be no repeat of how former Conservative Prime Minister Liz Truss sent the bond market into a tailspin in 2022 with her unfunded tax cut plans.

Initial reaction to her speech suggested investors were unfazed by the Labour Party's first economic programme.

But government prices fell later as the scale of the planned spending became apparent and investors scaled back their bets on Bank of England interest rate cuts next year.

Reeves said she would raise taxes by 40 billion pounds ($52 billion) a year, blaming the Conservatives for leaving her Labour Party with a budget "black hole".

"Any responsible Chancellor would take action," she said. "That is why today, I am restoring stability to our public finances and rebuilding our public services."

She painted a grim picture of Britain, with record waiting times in the health service, children studying in crumbling schools and dysfunctional transport and justice systems.

But in a setback for the new government, a budget watchdog said the economy was expected to grow by less than previously forecast between 2026 and 2028 after outperforming only slightly in 2024 and 2025.

Showing the scale of the new tax increases on top of those of the previous government, the watchdog also said Reeves' plans would take the government's tax take to a historic high of 38.2% of economic output by the end of the decade. That is still lower than in many other European economies but is up from 36.4% now and more than 5 points higher than before the pandemic.

According to the Institute for Fiscal Studies think-tank, tax hikes of 40 billion pounds would be equivalent to 1.25% of economic output, surpassed in recent history only in 1993 by a budget plan under the Conservatives.

Prime Minister Keir Starmer had warned "those with the broadest shoulders" would have to pay more to spare "working people."

The yield on 10-year British government bonds - which moves in the opposite direction to prices - was up by around four basis points on the day at 1600 GMT, having fallen sharply during Reeves' speech earlier.

Investors were pricing in fewer interest rate cuts by the BoE given the scale of government spending with four quarter-point reductions expected in 2025 compared with about five earlier in the day.

TAXES UP FOR BUSINESSES AND THE WEALTHY

Reeves announced a string of tax increases, saying "difficult decisions cannot be constantly delayed or deferred" as she sought to uphold her new rule get day-to-day spending back into balance by the end of the decade.

The rate of social security contributions paid by employers will rise by 1.2 percentage points to 15% from April, and a threshold at which firms start to pay it will come down, raising an extra 25 billion pounds a year in five years' time.

Company bosses warned that higher taxes, combined with planned new protections for workers and an increased minimum wage, could undermine Labour's growth ambitions.

"This is a tough budget for business," Rain Newton-Smith, the CBI's chief executive, said.

A cap on a tax on business profits was welcome but the overall rise in employer costs would "hit the ability to invest and ultimately make it more expensive to hire people or give pay rises," Newton-Smith said.

Other revenue-raising moves included changes to taxes on capital gains and inheritances and tax paid by private equity executives, non-domiciled residents and users of private jets and private schools.

But Reeves unexpectedly ruled out making more individuals pay basic and higher income tax rates after a freeze on the threshold for payments expires in the 2028/29 tax year.

She also extended a freeze on fuel duty and cut a tax on draught beer in pubs, measures that could help to reverse a fall in support for Starmer's fledgling government in opinion polls.

In another significant move, Reeves said she would change a second fiscal rule to allow for more borrowing, paving the way for 100 billion pounds in investment over the next five years.

Reeves said the government will now target a fall in public sector net financial liabilities as a share of the economy, rather than public sector net debt excluding the BoE.

By Stella Qiu

SYDNEY (Reuters) -Australian consumer price inflation slowed to a 3-1/2 year low in the third quarter, though the core measure was still sticky and reinforced market wagers that the central bank won't start cutting rates until next year.

Overall, the report was rather mixed, with consumers benefiting from government rebates on electricity and a drop in petrol, while services price pressures persisted. 

That kept market reaction muted. Investors slightly pared the chance of a rate cut from the Reserve Bank of Australia this December and next February to just 24% and 44%. Markets still see April next year as the most likely timing for the first easing.

Data from the Australian Bureau of Statistics on Wednesday showed the consumer price index (CPI) rose 0.2% in the third quarter, under forecasts of a 0.3% increase. 

Annual inflation dropped to 2.8%, from 3.8%, taking it back into the RBA's 2-3% target band for the first time since 2021, a result that was largely expected. 

The slowdown was driven by a 17.3% drop in electricity prices due to the government's subsidies, while petrol fell 6.2% in the quarter.

Policymakers are more focused on core inflation and the trimmed mean measure increased by 0.8% in the quarter, just above forecasts of a 0.7% gain. The annual pace though slowed to 3.5% from 4.0%.

Commonwealth Bank of Australia (OTC:CMWAY) on Wednesday abandoned its call for a first rate cut in December as the core measure was a touch firmer than it had expected. It is now pencilling in a cut in February next year, along with the other three big banks in Australia.

"The process of normalising the cash rate will be a story for 2025," said Gareth Aird, head of Australian economics at CBA.

Services inflation remains a source of concern for the RBA, staying elevated at 4.6% in the third quarter, slightly higher than the June quarter's 4.5%, and little changed over the past 12 months.

The central bank will have an updated set of economic forecasts when it decides on its next policy move on Tuesday.

The slow easing in inflation had Australian grocer Woolworths warning on Wednesday that earnings from its food division may fall as price-conscious consumers hunt for bargains.

POSITIVE IMPULSE

For September alone, CPI rose a muted 2.1% compared with a year earlier, the lowest since July 2021. The trimmed mean measure slowed to 3.2%, just a touch above the top of the target band.

The RBA has held its policy steady since November, judging the current cash rate of 4.35% - up from 0.1% during the pandemic - is restrictive enough to bring inflation to its target band of 2-3% while preserving employment gains.

The labour market has stayed surprisingly resilient, an argument against early rate cuts. But the easing in annual core inflation comes ahead of the RBA's projection for it to slow to 3.5% by the end of the year.

"Although quarterly trimmed mean CPI is not yet rising at pace consistent with the RBA’s target range, we think it will do so before long," Abhijit Surya, Australia and New Zealand Economist at Capital Economics.

By Jihoon Lee

SEOUL (Reuters) - South Korea's export growth is expected to have slowed for a third straight month in October on signs of cooling global demand for computer chips, a Reuters poll showed on Wednesday.

Outbound shipments from Asia's fourth-largest economy are forecast to have risen 6.9% in October from a year earlier, according to the median of 22 economists in the survey conducted Oct. 24-29.

That would be the 13th straight month of annual export growth but slightly weaker than the 7.5% year-on-year rise in September and the slowest rate since June.

"It is likely export growth has entered a slowing trend with IT demand beginning to gradually weaken amid limited demand for non-semiconductor exports," said Chun Kyu-yeon, an economist at Hana Securities.

South Korea, the first major exporting economy to report trade figures each month, is scheduled to report monthly data for October on Friday, Nov. 1, at 9 a.m. (0000 GMT).

Asia's fourth-largest economy barely grew in the third quarter due to a fall in exports, which had been led mainly by semiconductor sales to the United States.

"A slowdown in exports led by the semiconductor sector would be adverse news for the economic growth outlook if confirmed: semiconductor exports have largely been moving sideways in recent months," said Oh Suk-tae, an analyst at Societe Generale (OTC:SCGLY).

In the first 20 days of this month, exports fell 2.9%. Shipments to the United States and the European Union were down 2.6% and 8.9%, respectively, while those to China rose 1.2%.

"Growth in shipments to the United States, which has been robust, is seen slowing, while the recovery in China-bound shipments will be weaker than expectations," said Park Sang-hyun, an economist at iM Securities.

On the imports ledger, purchases are forecast to have risen 2.0% in October, after growing 2.2% in September.

The survey's median estimate of this month's trade balance came in at a surplus of $4.23 billion, compared with $6.66 billion in the prior month.

By Rae Wee

SINGAPORE (Reuters) - Asia shares eased on Wednesday on the back of weakness in China, as investors brace for a tightly contested U.S. election that could have huge ramifications for the world's second-largest economy, even as Beijing tries to shore up growth.

Gold rose to an all-time high as jitters over the close U.S. presidential race supported the yellow metal, while bitcoin also flirted with a record peak as markets weigh the prospect of a victory by Republican candidate Donald Trump.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.22% in early trade, tracking a decline in Chinese assets.

The CSI300 blue-chip index fell 0.16%, while Hong Kong's Hang Seng Index slid 0.64%.

The moves came even as Reuters reported on Tuesday that China is considering approving next week the issuance of more than 10 trillion yuan ($1.4 trillion) in extra debt in the next few years to revive its fragile economy.

"China's latest stimulus package appears underwhelming, with 60% allocated to local government debt relief," said Saxo's chief investment strategist Charu Chanana.

"While there's a stronger focus on supporting the property sector, urgency around broader structural issues - such as debt, deflation, and demographics - remains limited.

"Equity support could offer some lift to domestic confidence, but foreign investors are still highly concerned about potential tariff threats if next week's U.S. elections result in a Republican sweep."

China's new energy vehicles index ticked up 0.2%, largely unfazed by news that the European Union has decided to increase tariffs on Chinese-built electric vehicles to as much as 45.3%.

Meanwhile, U.S. stock futures ticked higher, buoyed by a solid result from Google-parent Alphabet (NASDAQ:GOOGL), which reported quarterly revenue that beat estimates.

Nasdaq futures gained 0.42%, while S&P 500 futures rose 0.36%.

Meta Platforms (NASDAQ:META) and Microsoft (NASDAQ:MSFT) report their earnings later in the day, followed by Apple (NASDAQ:AAPL) and Amazon.com (NASDAQ:AMZN) on Thursday. [.N]

Investors will be closely watching the results to determine whether Wall Street can sustain the optimism around technology and artificial intelligence that has lifted indexes to record highs this year.

Elsewhere, Japan's Nikkei rose nearly 1%, riding on the momentum of a weaker yen. (T)

U.S. FOCUS

Bitcoin stood just a whisker away from its peak of $73,803.25 and last bought $72,322.08, on track to gain 13% for the month.

The world's largest cryptocurrency has been bolstered by the growing possibility of Trump's return to the White House, as he is seen taking a more favourable stance towards digital assets.

"Bitcoin's strength should persist if the odds for a Republican sweep continue to grow, as a less likely Democratic sweep might meet a generalised sell-off," said Manuel Villegas, digital assets analyst at Julius Baer.

On the economic front, investors were also bracing for a slew of U.S. data this week that could guide the outlook for Fed policy.

The ADP National Employment Report is due later in the day alongside advance third quarter GDP estimates, which will come ahead of Friday's nonfarm payrolls figures.

Data on Tuesday showed U.S. job openings dropped to more than a 3-1/2-year low in September, though that was countered by a separate survey which showed consumer confidence increased to a nine-month high in October amid improved perceptions of the labour market.

"The U.S. data is still important for this week, there's no doubt about it," said Khoon Goh, head of Asia research at ANZ.

"We saw the JOLTS data out last night, it showed continued moderation of the labour market ... Today we have ADP, Q3 GDP, PCE deflator tomorrow and then payrolls Friday. So that will still be really important, particularly for the long-end yields and the impact on the dollar."

The dollar strayed not too far from a three-month high against a basket of currencies on Wednesday, though a stall in its recent rally gave sterling some respite above the $1.30 level.

The yen languished near a three-month low as it continued to feel the pressure from the loss of a parliamentary majority for Japan's ruling coalition in weekend elections.

The Aussie was little changed in the wake of domestic inflation data and last rose 0.15% to $0.6570.

In commodities, Brent crude futures ticked up 0.42% to $71.42 a barrel, while U.S. West Texas Intermediate crude futures rose 0.45% to $67.51 per barrel. [O/R]

Spot gold was last 0.18% higher at $2,779.81 an ounce, after having peaked at $2,781.69 earlier in the session. [GOL/]