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By Patturaja Murugaboopathy Oct 9 (Reuters) – Short-bias exchange-traded funds, which bet against stock indexes and fast-rising sectors like technology and artificial intelligence, are drawing strong inflows as lofty prices and policy risks spur some investors to position for a pullback. According to LSEG Lipper data, global short-bias funds drew $3.7 billion in September, the biggest monthly inflow in nearly three years. U.S. funds accounted for $2.2 billion of that while Japanese and South Korean funds took in $653 million and $424 million respectively. They have added another $1.4 billion so far this month. Flows into short-bias funds have often increased during times of stress, delivering strong gains in the 2008 financial crisis when broader funds struggled. While such inflows are not always a precursor to downturns, rising allocations to funds that profit from falling markets are seen as a sign of unease, with valuation risks mounting. This year, AI optimism has lifted megacap tech firms such as Nvidia, Microsoft and Oracle, pushing the S&P 500, Nasdaq and Dow to fresh peaks. The S&P 500 and Nasdaq hit record highs on Thursday, up 15% and 19% this year, while the Dow has gained 10%. The forward 12-month price-to-earnings ratio of the MSCI World index was at a near 5-year high of 20.4 at the end of September. However, the surge in equities has elicited a wave of warnings about the risk of a looming correction. The Bank of England has pointed to rising risks of a market reversal, citing U.S. auto credit stress and political deadlocks in France and Japan, while the Fed faces pressure that could spark a sharp repricing of U.S. assets. International Monetary Fund chief Kristalina Georgieva spoke on Wednesday about the risks to the world economy from potentially large corrections in lofty stock markets. JPMorgan Chase CEO Jamie Dimon also warned of a heightened risk of a significant correction in the U.S. stock market within the next six months to two years, the BBC reported. So far in October, the Direxion Daily Semiconductor Bear 3X Shares has led with $255 million of inflows, followed by $200 million into the ProShares UltraPro Short QQQ and $143 million into the ProShares Short S&P 500. (Reporting By Patturaja Murugaboopathy in Bengaluru; editing by Vidya Ranganathan and Mark Heinrich)

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Washington, Oct 9 (Reuters) – Homeland Security Secretary Kristi Noem on Thursday said she was purchasing more buildings in Chicago for law enforcement and hardening existing buildings with additional security measures. "I was there a few days ago and looked at some facilities that we can deploy more law enforcement out of," she said at a White House Cabinet meeting. (Reporting by Jeff Mason, writing by Maiya Keidan)

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Oct 9 (Reuters) – The U.S. central bank should move cautiously on further interest rate cuts, Federal Reserve Governor Michael Barr said on Thursday in a speech that leaned heavily into the risks of inflation, even as he acknowledged the potential vulnerabilities in a "roughly balanced" labor market. "The FOMC (Federal Open Market Committee) should be cautious about adjusting policy so that we can gather further data, update our forecasts, and better assess the balance of risks," Barr said in remarks prepared for delivery to the Economic Club of Minnesota, his first on monetary policy since June. With both upside inflation risks and downside risks to the labor market, the Fed is in a "challenging position" with no risk-free path forward as it sets monetary policy, Barr said, explicitly borrowing the way Fed Chair Jerome Powell phrased the central bank's current quandary. Barr said he supported the Fed's quarter-of-a-percentage-point reduction to the policy rate last month, but he focused many of his comments on the risks that tariffs pose to inflation, suggesting he is not sold on the need for a series of rate cuts, as financial markets currently expect. Barr said he forecasts underlying inflation by the Fed's key measure, the core Personal Consumption Expenditures Price Index, to rise to above 3% by the end of this year, and noted that Fed officials do not expect headline inflation to fall to the central bank's 2% goal until the end of 2027. That would be the longest period of PCE inflation above 2% since a seven-year stretch that ended in 1993, he said. "After the high inflation Americans have endured, two more years would be a long time to wait for a return to our target, and that possibility weighs on my judgment for appropriate monetary policy," he said. (Reporting by Ann Saphir; Editing by Paul Simao)

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(Adds details about China entities being sanctioned, background) By Timothy Gardner WASHINGTON, Oct 9 (Reuters) – The U.S. imposed sanctions on about 100 individuals, entities and vessels, including a Chinese independent refinery and terminal, that helped Iran's oil and petrochemicals trade, the administration of President Donald Trump said on Thursday. The Treasury Department sanctioned the Shandong Jincheng Petrochemical Group Co, which it said is an independent teapot refinery in Shandong Province that has purchased millions of barrels of Iranian oil since 2023. It also sanctioned China-based Rizhao Shihua Crude Oil Terminal Co, which operates a terminal at Lanshan Port. Treasury said it has accepted more than a dozen of Iran's so-called shadow fleet vessels that evade the sanctions. The tankers included Kongm, Big Mag, and Voy. Treasury said the tankers transported several million barrels of Iranian oil to Rizhao. The U.S. believes Iran's oil networks help Tehran fund its nuclear and missile programs and support militant proxies throughout the Middle East. Iran says its nuclear program is for peaceful purposes. The sanctions came even as Israel and Hamas signed a Gaza ceasefire and hostage deal, which if fully implemented, would bring the two sides closer than any previous effort to halt a war that had evolved into a regional conflict, drawing in countries such as Iran, Yemen and Lebanon. Treasury said it was the fourth round of sanctions in which the administration targeted China-based refineries that continue to purchase Iranian oil. "The Treasury Department is degrading Iran’s cash flow by dismantling key elements of Iran’s energy export machine,” said Treasury Secretary Scott Bessent. The State Department said the U.S. also designated the first China-based terminal, Jiangyin Foreversun Chemical Logistics, for receiving Iranian-origin petrochemical products. The Chinese embassy in Washington and Iran's mission to the United Nations in New York did not immediately respond to requests for comment. (Reporting by Timothy Gardner, Bhargav Acharya, Katharine Jackson Editing by Marguerita Choy)

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