By Caroline Valetkevitch

NEW YORK (Reuters) -Investors will be looking for evidence that investment in artificial intelligence among S&P 500 companies is beginning to pay off as the reporting season progresses, despite the fact that analysts expect profit growth to decelerate from the previous quarter.

S&P 500 earnings are estimated to have increased 5.3% over the year-ago quarter, down from a second-quarter gain of 13.2%, but technology and communication services sectors are forecast to have the strongest year-over-year growth, according to LSEG data as of Friday.

The earnings period unofficially kicks off this week, with reports from major financial firms including JPMorgan Chase (NYSE:JPM) and Wells Fargo due Friday.

AI-related companies have dominated earnings since last year, and optimism over AI plans have helped to drive strong gains in the market. The S&P 500 is at record high levels and up roughly 21% for the year so far, with tech and communication services leading sector gains since Dec. 31.

"Many analysts will start looking at how and if a lot of these larger companies can monetize the model that they're training, and we've seen the ones that have been able to do so have been rewarded quite well," said Howard Chan, chief executive officer of Kurv Investment Management in San Francisco.

Technology sector earnings in aggregate are expected to have gained 15.4% from the year-ago quarter, while communication services earnings are seen up 12.3%, based on LSEG data.

Shares of Meta Platforms (NASDAQ:META) jumped on Aug. 1, a day after it issued an upbeat sales forecast for the third quarter, signaling that digital-ad spending on its social media platforms can cover the cost of its AI investments.

"Companies like Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOGL), they're spending quite a bit, but it's a little bit less understood... how that will interplay with their existing businesses," Chan said.

Investors may also be hoping earnings can justify higher stock prices. With the S&P 500 at record high levels, the index is now trading at 22.3 times future 12-month earnings estimates, well above its long-term average of 15.7, according to LSEG Datastream.

Solita Marcelli, chief investment officer for Americas at UBS Global Wealth Management, wrote in a note Wednesday that third-quarter results could provide a catalyst for gains as investors focus on tech fundamentals and AI.

"We continue to favor the semiconductor space and megacaps for AI exposure," she wrote, noting that she expects tech and AI companies to beat results for the quarter ended in September and also raise their outlooks.  

UBS expects overall AI semiconductor industry revenues to grow sharply, and reach $168 billion by the end of this year, according to the note.

Earnings growth in most S&P 500 sectors is seen lower than the previous quarter.

Investors had been worried the economy may have been getting too weak. The Federal Reserve last month kicked off a monetary easing cycle by cutting its benchmark interest rate by an unusually large 50 basis points, the first reduction in borrowing costs since 2020, amid signs the labor market was weakening.

Those concerns eased a bit with last week's monthly U.S. jobs data, which showed that U.S. job gains increased in September by the most in six months, and that unemployment rate fell to 4.1%.    

Still, company comments about consumer health will be scrutinized. "Lower front-end rates are more helpful to consumers than companies ... So the Fed policy is more something that consumer-driven companies could benefit from," said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

At the same time, some strategists said, investors may be eager to hear from companies about what the recent surge in oil prices might mean for businesses. Oil prices have gained as Middle East tensions have escalated.

Earnings for the energy sector are expected to have fallen 19.7% in the third quarter from a year ago, LSEG data shows.

By Manoj Kumar and Karin Strohecker

NEW DELHI/LONDON (Reuters) - The World Bank raised its growth forecast for South Asia to 6.4% in 2024 from an earlier estimate of 6.0%, citing the strength of domestic demand in India and quicker recoveries in crisis-hit countries such as Sri Lanka and Pakistan.

India's economic growth forecast for the current fiscal year, ending in March 2025, was revised to 7% year-on-year, up from April's estimate of 6.6%, helped by a rebound in agricultural output and increased private consumption.

"You have an emerging class of consumers in India that's driving the economy forward, you have recoveries from crises in Sri Lanka and in Pakistan, you also have a tourism-led recovery in Nepal and Bhutan," Martin Raiser, World Bank Vice President for South Asia, told Reuters.

The upward revision confirms South Asia as the fastest growing emerging economy region monitored by the World Bank. The Washington-based lender projects South Asia will see robust 6.2% growth annually for the following two years.

Raiser said there was "significant upside potential" to growth with greater integration of South Asian countries into the global economy, but countries needed to stick with economic reform programmes to sustain momentum.

On Wednesday, India's central bank maintained its GDP growth forecast at 7.2% for the current fiscal year and shifted its policy stance to neutral.

The World Bank projected Pakistan's economy would grow by 2.8% in the current fiscal year, which started in July, an increase from the previous estimate of 2.3%, aided by a recovery in manufacturing and easing monetary policy.

Sri Lanka, which is clawing its way out of a sovereign debt default and its worst economic crisis in decades, saw the biggest upward revision, with growth expected to come in at 4.4% this year and 3.5% in 2025.

Nepal's growth forecast was raised to 5.1% from 4.6% for the 2024/25 fiscal year beginning mid-July, and Bhutan's to 7.2% from 5.7%.

But Bangladesh's growth forecast was downgraded to 4.0% from 5.7% for the fiscal year 2024/25, spanning from July to June, reflecting a slowdown in garment exports amid recent social unrest.

The World Bank recommended the region should boost women’s labour force participation - currently the lowest globally at 32%. Raising employment among women to levels comparable to those among men could raise output by as much as one-half in the long term, the report said.

"Bringing more women into the labour force could add significantly to the production potential," said Raiser.

BANGKOK (Reuters) - Thai consumer confidence dropped for a seventh consecutive month in September to its lowest level in 17 months, due mainly to concerns about slow economic growth and floods in parts of the country, a survey showed on Thursday.

The consumer index of the University of the Thai Chamber of Commerce fell to 55.3 in September from 56.5 in the previous month, the university said in a statement.

Confidence was hurt by flooding and also high living costs, despite government handouts for vulnerable groups, the university said.

"The floods have a psychological impact, overshadowing the positive sentiment of the handout scheme," university president Thanavath Phonvichai told a press conference.

The government last month launched phase one of its flagship $14 billion stimulus handout scheme, which will eventually see an estimated 45 million people receive 10,000 baht ($298) each to spend within six months, aimed at sparking economic activity.

The initial phase will 14.5 million welfare card holders and disabled people receive their handouts in cash.

The scheme, which was scheduled for rollout in the last quarter of this year, is the cornerstone of the government's plans to kickstart Southeast Asia's second-largest economy, which expand 2.3% in the second quarter of 2024.

The central bank predicts 2.6% growth this year, after last year's 1.9% expansion that trailed regional peers.

($1 = 33.5300 baht)

By David Shepardson and Marisa Taylor

WASHINGTON (Reuters) - The Federal Aviation Administration could approve a license for the launch of SpaceX's Starship 5 as soon as this month, a source told Reuters on Tuesday.

Last month, the FAA said it did not expect a determination on a license before late November. SpaceX said on social media late on Monday that Starship's fifth flight test could launch as soon as Oct. 13, pending regulatory approval.

The FAA, which has repeatedly said it did not expect to decide on a license until late November, on Tuesday only said it continues to review the proposed mission and would make a decision "once SpaceX has met all licensing requirements." It made no mention of the November timeframe.

SpaceX CEO Elon Musk has harshly criticized the FAA, including for proposing a $633,000 fine against SpaceX over launch issues and for the delay in approving the license for Starship 5, which the company says has been ready to launch since August.

Musk has called for the resignation of FAA Administrator Mike Whitaker and threatened to sue the agency.

SpaceX suggested last month the delay in FAA approval was over "superfluous environmental analysis"

Whitaker faced questions at a congressional hearing last month about the delay and responded that SpaceX had failed to complete a timely sonic boom analysis for the Starship 5 launch.

"The delay of the Starship (launch) had to do with SpaceX filing an application and not disclosing that they were in violation of Texas and federal law on some matters, and that's a requirement to get a permit," Whitaker said.

In an email invitation to VIP guests seen by Reuters, SpaceX said it is targeting the launch for Sunday. The invitation added "as with any test, there is a chance we don't launch on the first attempt."

On Sunday, the FAA said SpaceX's workhorse Falcon 9 rocket could return to flight for a mission on Monday for the European Space Agency's Hera spacecraft from Florida.

The FAA on Sept. 30 said SpaceX must investigate why the second stage of its Falcon 9 malfunctioned after a NASA astronaut mission, grounding the launch vehicle for the third time in three months.

HONG KONG/SHANGHAI (Reuters) - China's central bank said on Thursday it would start accepting applications from financial institutions to join a newly created funding scheme, initially worth 500 billion yuan ($70.62 billion), to aid the capital market.

The People's Bank of China (PBOC) said eligible securities firms, fund companies and insurers can apply to join the swap scheme, which gives them easier access to funding to buy stocks.

The announcement came after Chinese stocks tumbled on Wednesday following a blistering rally, as previous investor enthusiasm about Beijing's plans to revive the economy waned.

The PBOC first announced the scheme on Sept. 24 as part of a broad package of policies to stimulate the economy and boost capital markets.

Under the swap facility, eligible securities firms, fund companies and insurers can use their assets including bonds, stock ETFs and holdings in constituents of the CSI 300 Index as collateral in exchange for highly liquid assets such as treasury bonds and central bank bills.

The initial scale of the swap program is set at 500 billion yuan, and can be expanded in the future.

($1 = 7.0800 Chinese yuan)

(Reuters) - The interest rate for the most popular U.S. home loan rose to 6.36% last week, marking the biggest weekly increase in more than a year after better-than-expected economic data caused financial markets to scale back bets on further Federal Reserve interest-rate cuts.

The average contract rate on a 30-year fixed-rate mortgage rose 22 basis points in the week ended Oct. 4, the Mortgage Bankers Association said on Wednesday. The last time it rose that much was in July 2023, when the Fed was still increasing interest rates in its battle to bring down inflation.

The U.S. central bank began cutting its short-term benchmark rate last month, signaling confidence that inflation is headed toward its 2% goal with a bigger-than-expected reduction of half a percentage point aimed at keeping a cooling labor market from weakening further.

Mortgage rates had peaked in October 2023, near 8%, and by the time of the Fed's September policy-setting meeting had fallen by more than 1.75 percentage points in anticipation of the Fed's pivot to policy easing.

Last week's jump puts the home borrowing rate back up where it was in late August, before the Fed's rate cut.

The 30-year rate closely tracks the yield on the 10-year Treasury note, which rose sharply last week after a government report showed job growth jumped in September and the unemployment rate fell.

The strong showing eased concerns that the labor market was cooling too sharply. Traders moved to price in smaller, and fewer, Fed rate cuts over coming months than they had previously anticipated.

Financial market bets now reflect an expectation that the Fed will reduce its policy rate, now in the 4.75%-5.00% range, to a range of 3.50%-3.75% by the middle of next year.

BEIJING (Reuters) -China on Tuesday announced provisional anti-dumping measures on brandy imports from the European Union, according to a statement from the Chinese commerce ministry, reversing an earlier move amid continued tense trade talks.

From Oct. 11, importers will be required to provide what the ministry described as a corresponding security deposit to Chinese customs when importing relevant brandies originating in the EU.

The move was an about-turn after Beijing recently said it would not impose provisional tariffs on brandy imported from the EU despite finding it had been sold in China below market prices.

That was supposed to give both sides some breathing room in their ongoing heated trade talks.

Previously, when the commerce ministry decided not to improse provisonal anti-dumping measures it had said that probe would end before Jan. 5, 2025, but that it could be extended.

China had recently been trying to drum up support from the bloc's 27-member states to reject the European Commission's proposal to adopt hefty added tariffs on Chinese-made electric vehicles in a vote expected soon.

By Kevin Yao and Joe Cash

BEIJING (Reuters) -China is "fully confident" of achieving its full-year economic and social development targets, with some funds from 2025's budget being brought forward to support projects, chairman of the country's economic planner Zheng Shanjie said on Tuesday.

China stocks blasted to two-year highs after a slew of stimulus steps announced in recent weeks supported sentiment in early trade, but later retreated. Hong Kong shares also slid as investors walked back some of the stimulus excitement.

Zheng, chairman of the National Development and Reform Commission (NDRC), told a press conference China's economy remains largely stable but is facing more complex internal and external environments.

"The international market is volatile, global trade protectionism has intensified, and uncertain and unstable factors have increased. These will have an adverse impact on my country through trade, investment, finance and other channels," Zheng said.

Downward pressure on the domestic economy has increased, he added.

To support local governments, China will issue 100 billion yuan ($14.12 billion) from next year's central government budget and another 100 billion yuan for key investment projects by the end of this year, Zheng said.

The country will also quicken fiscal spending and "all sides should keep making efforts more forcefully" to strengthen macroeconomic policies, he added.

Investors and economists expect more policy support on the fiscal side to sustain the market's optimism. They said it will take time to restore consumer and business confidence and get the economy back on more solid footing. A housing market recovery, in particular, could be a long slog.

"We anticipate that the government will arrange 1-3 trillion yuan of additional fiscal support this year and next to boost the real economy, recapitalise banks, and stabilise the property market," said Yue Su, principal China economist at the Economist Intelligence Unit.

"This, along with investments from special long-term bonds planned for next year, is expected to primarily impact 2025's economic growth."

The government set a growth target of around 5% this year, but economic indicators showed growth momentum waned since the second quarter, weighing on households spending and business sentiment amid a severe property downturn.

A private report by recruiting platform Zhaopin showed on Tuesday that average pay offered by recruiters in China's 38 major cities fell 2.5% in the third quarter from the second, and down 0.6% from a year earlier.

In an effort to reverse the economic downturn, China unveiled in late September its most aggressive monetary stimuluspackage since the COVID-19 pandemic, coupled with extensive property market support.

Zheng said that to address insufficient domestic demand, policymakers will focus on enhancing people's livelihood to stimulate consumption and investment, such as supporting disadvantaged people, consumer goods trade-ins, elderly care and births. No further details were announced.

Vice Chairman of the NDRC, Liu Sushe, stated that most of the 6 trillion yuan in government investment this year was allocated to specific projects, with 90% of local government special bonds used for project construction issued by September.

At the same press conference, another vice chairman of the NDRC, Zhao Chenxin, said that China's economic growth remained "generally stable" over the first three quarters.

($1 = 7.0805 Chinese yuan)

By Hyunjoo Jin, Heekyong Yang and Joyce Lee

SEOUL (Reuters) -Samsung Electronics warned its third-quarter profit would come in below market expectations and apologised for the disappointing performance with the tech giant lagging its rivals in supplying high-end chips to Nvidia (NASDAQ:NVDA) in the booming AI market.

Samsung said its AI chip business with an unidentified major customer was hit by a delay, while Chinese chip rivals increased supplies of conventional chips, contributing to the decline in its semiconductor earnings.

The comments illustrate the challenges facing the company, which has been the world's biggest memory chipmaker for three decades but is battling growing competition in both conventional and advanced chips.

The world's largest memory chip, smartphone and TV maker estimated an operating profit of 9.1 trillion won ($6.78 billion) for the three months ended Sept. 30, versus a 10.3 trillion won LSEG SmartEstimate.

That would compare with 2.43 trillion won in the same period a year earlier and 10.44 trillion won in the preceding quarter.

"The earnings are a shock compared to what many analysts expected initially," said Lee Min-hee, an analyst at BNK Investment & Securities.

"I don’t see its earnings improving in the current quarter," he said, saying it lags SK Hynix in increasing sales of high bandwidth memory (HBM) chips to Nvidia and its high exposure to the Chinese market hurts.

Samsung's late response to the AI chip market increases its reliance on traditional, lower-margin chips, making it more vulnerable to competition from China and slowing demand for smartphones and PCs, analysts say.
 

High-margin chips used in AI servers are driving a recovery in the chip market after a post-pandemic downturn last year. Still, Samsung has lagged SK Hynix in supplying high-bandwidth memory (HBM) chips to AI leader Nvidia.

"We have caused concerns about our technological competitiveness, with some talking about the crisis facing Samsung," Young Hyun Jun, Vice Chairman, Device Solutions Division, Samsung Electronics (KS:005930), said.

"These are testing times," he said, pledging to turn the challenge into an opportunity and focus on enhancing long-term technological competitiveness.

Samsung's share price, already down more than 20% so far this year, fell 1.6% after the earnings guidance.

HBM CHIPS DELAYED

Samsung said in a statement the start of sales of its high-end HBM3E chips to a major customer "was delayed relative to our expectations". It did not elaborate on the issue.

Earnings declined in the company's memory chip business as Chinese rivals increased supplies of "legacy" products and some mobile customers adjusted inventories, offsetting solid demand for HBM and other chips used in servers, Samsung added.

Samsung's contract chip manufacturing business, which designs and produces custom-made chips for other companies, likely continued to lose money in the third quarter as it is struggling to compete with leader TSMC, which counts Apple (NASDAQ:AAPL) and Nvidia among its customers, analysts said.

Samsung's chief Jay Y. Lee told Reuters on Monday that he is not interested in spinning off the contract chip manufacturing business as well as its logic chip designing operation.

Samsung said one-off costs such as provisions for "incentives" and the unfavourable local currency also contributed to the chip earnings decline.

Earnings in its mobile division improved from the preceding quarter on solid sales of its flagship smartphones, while earnings at its display unit grew as its customers, which include Apple, launched new models.

Samsung will announce detailed earnings results later this month.

In May, Samsung abruptly replaced the chief of its semiconductor division, handing the reins to Jun in a bid to overcome a "chip crisis".

Samsung is also cutting as much as 30% of overseas staff at some divisions, Reuters reported in September, underscoring the challenges it faces.

Its U.S. rival Micron (NASDAQ:MU) last month forecast first-quarter earnings ahead of Wall Street estimates and reported its highest quarterly revenue in over a decade on the back of booming demand for its memory chips used in AI.

By Ankur Banerjee

SINGAPORE (Reuters) - The dollar clung to seven-week highs against major currencies on Tuesday as investors ponder the outlook for U.S. rates after a strong jobs report last week dashed bets for large rate cuts, while escalating tensions in Middle East dented risk sentiment.

Traders have drastically shifted their monetary easing expectations from the Federal Reserve this year.

Markets are no longer fully pricing in a rate cut in November and are ascribing an 86% chance of a 25 basis points (bps) reduction, the CME FedWatch tool showed. Just 50 bps of easing is priced in by December, down from over 70 bps just a week earlier.

That has kept the dollar on the front foot and surging to a multi-week high against the euro, sterling and the yen.

The dollar index, which measures the U.S. unit against major rivals, last fetched 102.41, just below the seven-week high of 102.69 it touched on Friday.

A shallower path of cuts from the Fed, coupled with strong data and the prospect of a 'no landing' scenario has helped support the dollar, said Kieran Williams, head of Asia FX at InTouch Capital Markets.

"While the USD has room to strengthen from here, given the hawkish repricing post-FOMC other catalysts may be necessary."

Federal Reserve Bank of St. Louis President Alberto Musalem said on Monday he supports more interest rate cuts as the economy moves forward on a healthy path, while noting that it is appropriate for the central bank to be cautious and not overdo the monetary easing. 

"Further gradual reductions in the policy rate will likely be appropriate over time," the official said.

The benchmark 10-year U.S. Treasury yield remained above 4% in Asian hours, having touched the level on Monday for the first time in two months as traders curtailed wagers on super-sized rate cuts. [US/]

Investor focus this week will be on the inflation report due on Thursday as well as the minutes of the Federal Reserve's September meeting scheduled to be released on Wednesday. China markets are also due to open after a week-long holidays.

China's offshore yuan strengthened a bit to 7.0594 per dollar in early trading.

The euro fetched $1.098175 in early trading, not far from the seven week low of $1.09515 it hit last week. The pound was at $1.3095, close to the over three week low of $1.30595 it touched on Monday.

The yen was slightly stronger at 147.795 per dollar in early trading having also slumped to a seven week low of 149.10 on Monday as traders contemplated the interest rate path that the Bank of Japan is likely to take in the near term.

New Japanese premier Shigeru Ishiba stunned markets last week when he said the economy was not ready for further rate hikes, an apparent about-face from his previous support for the BOJ unwinding decades of extreme monetary stimulus.

Those comments pushed the yen lower and has cast doubts over how aggressive the BOJ would be in raising rates.

In other currencies, the Australian dollar was a tad stronger at $0.6768.

The New Zealand dollar was 0.3% higher at $0.6144 ahead of the monetary policy decision on Wednesday. A majority of economists in a Reuters poll last week said the Reserve Bank of New Zealand will cut interest rate by 50 basis points.