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By Howard Schneider PHILADELPHIA (Reuters) -The U.S. labor market remained mired in its low-hiring, low-firing doldrums through September, though the economy "may be on a somewhat firmer trajectory than expected," Federal Reserve Chair Jerome Powell said on Tuesday, noting that policymakers will take a "meeting-by-meeting" approach to interest rate cuts as they balance job market weakness with above-target inflation. Powell, in remarks to a National Association for Business Economics conference in Philadelphia, acknowledged the economic dilemma that has split U.S. central bank officials almost evenly among those concerned most about still-high and potentially rising inflation, and those worried the labor market may be facing a fast slide downward. A newly added complication, Powell said, is that recent data on economic activity have been stronger than expected, but that hasn't yet translated into renewed hiring strength. "You do have a bit of tension between labor market data – we see very low levels of job creation – and yet people are spending," Powell said. "We are going to have to see how that plays out." The analysis, for now, will be done in the absence of official data largely suspended by the U.S. government shutdown. Powell said he felt there was adequate insight for the Fed's coming October 28-29 meeting, but that "we'll start to miss that data, particularly October data," if the shutdown persists. But for the time being, Powell said, there is a broad-enough array of public and private information to make a policy judgment, with the Bureau of Labor Statistics recently told by the Trump administration that it could release its Consumer Price Index report for September. It is now due to be published on October 24, ahead of the Fed's next policy meeting. "Based on the data that we do have, it is fair to say that the outlook for employment and inflation does not appear to have changed much since our September meeting four weeks ago," at which the Fed cut its benchmark interest rate by a quarter of a percentage point, Powell said. "Data available prior to the shutdown, however, show that growth in economic activity may be on a somewhat firmer trajectory than expected." His remarks did not change the near unanimous consensus among investors that the Fed would cut its policy rate by another quarter of a percentage point in two weeks. Powell is "saying that the economy is on solid footing, but he's also saying we have weakness … He's preparing the markets for a series of rate cuts, but not necessarily in a sequential order," said Peter Cardillo, chief market economist with Spartan Capital Securities in New York. "He'll cut by 25 basis points at the end of this month, then they'll assess." 'NO RISK-FREE' POLICY PATH Powell noted the "healthy debate" within the Fed, reflected in recent projections that showed about half of its policymakers expecting only one or no more rate cuts this year, and the rest projecting two or more. It's a sign of the tradeoffs the Fed is facing between securing its 2% inflation target and protecting the job market. "There is no risk-free path for policy as we navigate the tension between our employment and inflation goals," Powell said, noting that the policy projections issued by Fed officials every three months "should be understood as representing a range of potential outcomes whose probabilities evolve as new information informs our meeting-by-meeting approach to policymaking." Even with the September jobs report delayed, Powell, who devoted most of his formal remarks on Tuesday to a discussion of Fed balance-sheet policy, said he drew from a variety of public and private data sources for insight on the job market. "While official employment data for September are delayed, available evidence suggests that both layoffs and hiring remain low, and that both households' perceptions of job availability and firms' perceptions of hiring difficulty continue their downward trajectories," Powell said. The elevated inflation, he said, was partly due to rising goods prices that "primarily reflect tariffs rather than broader inflationary pressures." (Reporting by Howard Schneider; Editing by Paul Simao)

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(Reuters) -OpenAI will allow mature content for ChatGPT users who verify their age on the platform starting in December, CEO Sam Altman said, after the chatbot was made restrictive for users in mental distress. "As we roll out age-gating more fully and as part of our 'treat adult users like adults' principle, we will allow even more, like erotica for verified adults," Altman wrote in a post on X on Tuesday. Altman said that OpenAI had made ChatGPT "pretty restrictive" to make sure it was being careful with mental health issues, though that made the chatbot "less useful/enjoyable to many users who had no mental health problems." OpenAI has been able to mitigate mental health issues and has new tools, Altman said, adding that it is going to safely relax restrictions in most cases. In the coming weeks, OpenAI will release a version of ChatGPT that will allow people to better dictate the tone and personality of the chatbot, Altman said. "If you want your ChatGPT to respond in a very human-like way, or use a ton of emoji, or act like a friend, ChatGPT should do it (but only if you want it, not because we are usage-maxxing)," according to Altman. Earlier on Tuesday, Meta unveiled a new system to limit what users under 18 can see on Instagram and its generative AI tools, using filters inspired by the PG-13 movie rating system. (Reporting by Juby Babu in Mexico City; Editing by Alan Barona)

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By Michael S. Derby (Reuters) -Federal Reserve Chair Jerome Powell said on Tuesday the end of the central bank’s long-running effort to shrink the size of its holdings, widely known as quantitative tightening, or QT, may be coming into view. Given the central bank’s long-running goal of leaving enough liquidity in the financial system to allow for firm control of short-term rates and normal money market volatility, Powell said “we may approach that point in coming months, and we are closely monitoring a wide range of indicators” to know if that has happened. As a signal the end stage is getting closer, "some signs have begun to emerge that liquidity conditions are gradually tightening, including a general firming of repo rates along with more noticeable but temporary pressures on selected dates,” Powell said at a gathering held by the National Association for Business Economics in Philadelphia. In his remarks, Powell also defended the central bank's use of the balance sheet and other tools for monetary policy. The endgame for QT has been a topic of market debate for some time but has gained urgency over recent weeks as the Fed's reverse repo facility, or RRP, has fallen to effectively near-zero usage. The RRP tool helps set a soft floor underneath short-term rates and assists the Fed in keeping its interest rate target within the desired range, now set at between 4% and 4.25%. That facility peaked at $2.6 trillion at the end of 2022. The RRP facility has largely existed to mop up the excess liquidity the Fed created during the pandemic and now that it has been effectively drained out, QT will now lower reserves. The further reserves fall, the more likely liquidity scarcity could emerge with little warning and rattle money markets, in turn complicating the Fed's ability to keep its monetary policy interest rate target where it wants it to be. Something like that played out in September 2019 during the last period of QT, forcing the Fed to intervene unexpectedly to add liquidity back to the system. Since then, the Fed has added something called the Standing Repo Facility – it provides fast cash loans to eligible financial firms – as a shock absorber for market liquidity needs. Money markets and the Fed got through the end of the third quarter smoothly, with markets not needing to turn to the Fed for liquidity needs in any substantial size.  STILL NOT ENTIRELY CLEAR WHEN QT MIGHT END The QT process, which has been running since 2022, is designed to remove excessive amounts of liquidity the Fed added to financial markets during the COVID-19 pandemic. Cash was pumped into the financial system via large-scale purchases of Treasury and mortgage bonds, which were aimed at stabilizing markets and providing stimulus when the Fed’s short-term rate target was at near-zero levels. The asset buying helped Fed holdings more than double to around $9 trillion. Allowing a set amount of bonds to mature each month and not be replaced has helped take the Fed balance sheet down to $6.6 trillion. It’s unclear how much further the Fed can go with QT but some officials have said there remains plenty of liquidity in the financial system. Powell did not say how far the Fed would be able to shrink its holdings. A survey of large banks, money managers and others conducted before the Fed's September 16-17 Federal Open Market Committee meeting projected a January 2026 end-date for QT, with the overall size of the Fed's balance sheet at $6.2 trillion. Survey respondents also said they saw bank reserve levels at $2.9 trillion from their current level of $3 trillion.   FED CHIEF DEFENDS USE OF BALANCE SHEET, OTHER TOOLS Powell noted in his remarks that broadly speaking, "our ample reserves regime has proven remarkably effective for implementing monetary policy and supporting economic and financial stability.” The Fed's usage of its balance sheet as a policy tool, as well as the tools it uses to help manage interest rates, has been controversial, no less so than with the current Trump administration. Treasury Secretary Scott Bessent has accused the central bank of broad mission creep with the use of the balance sheet, which he believes has distorted financial markets.  The Fed has also caught heat for its interest rate management tools, which have paid out so much money to eligible financial firms that the Fed is now managing a $244 billion loss, causing some politicians to weigh whether those powers should be removed. Powell cautioned against such a move, saying "if our ability to pay interest on reserves and other liabilities were eliminated, the Fed would lose control over rates." To get it back, "large sales of securities over a short period of time would be needed to shrink our balance sheet and the quantity of reserves in the system," Powell said, adding "the volume and speed of these sales could strain Treasury market functioning and compromise financial stability."  (Reporting by Michael S. Derby; Editing by Andrea Ricci)

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By Nandita Bose WASHINGTON (Reuters) -U.S. support for Argentina hinges on the ruling party of President Javier Milei succeeding in this month's midterm legislative elections, President Donald Trump said on Tuesday, saying "we're not going to waste our time" if Milei's party doesn't win. Trump's remarks came as he and Milei met at the White House just days after the U.S. agreed to provide a major financial lifeline to the South American nation. "I'm with this man because his philosophy is correct, and he may win it," Trump said ahead of a White House lunch with Milei and members of Trump's cabinet. "He may not win, but I think he's going to win. And if he wins, we're staying with him. And if he doesn't win, we're gone." Trump's remark rattled Argentine markets that had been buoyed by the support package recently announced by U.S. Treasury Secretary Scott Bessent, the centerpiece of which is a $20 billion currency swap with Argentina's central bank, exchanging stable U.S. dollars for volatile pesos. Argentina's main stock market reversed earlier gains and was down about 2% following Trump's comments. Bessent, at Tuesday's meeting, said the package – full details of which have not been announced – is predicated on the continuance of economic policies favored by the Trump administration. "Going back to Peronist policies would cause a rethink," Bessent said. Bessent said, however, that the aid package was not dependent on Argentina ending a separate swap line arrangement with China. "American assistance to Argentina is not predicated on ending the swap with China," Bessent said. The economic lifeline for Argentina marks an unusual move for the U.S., particularly under an administration that has largely eschewed major foreign interventions.  The White House has framed the deal as a strategic effort to stabilize a key regional ally. But it has drawn criticism at home. Many Democratic lawmakers have accused Trump of prioritizing foreign bailouts and investor protections while the U.S. government remains shut down. American farmers have also voiced frustration, noting that China has shifted soybean purchases from U.S. producers to Argentine growers this year. While details of the agreement remain unclear, the bailout could offer Milei a much-needed political boost as he works to stave off a deepening economic crisis and shore up his party's support. He suffered a major setback last month when his party lost a key provincial election and now faces a critical midterm vote later this month. The assistance also underscores the extent to which the Trump administration is willing to support a political ally who has cultivated strong ties with the president and American conservatives in recent years.  Trump has described Milei as his "favorite president," and the Argentine president was one of two world leaders onstage during Trump's inauguration. (Reporting by Nandita Bose in Washington; Additional reporting by Andrea Shalal and Leila Miller; Editing by Ross Colvin and Alistair Bell)

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By Sukriti Gupta and Noel Randewich (Reuters) -Wall Street indexes were mixed on Tuesday as investors digested mostly positive quarterly results from big U.S. banks, comments from Federal Reserve Chair Jerome Powell and an ongoing U.S.-China trade war. A slew of major lenders reported solid results on strong performance in the investment banking segment, helping the S&P 500 banking index rally 2%. Wells Fargo surged 8.4% and was on track for its best day in six months and Citigroup jumped 4.6% after both lenders beat estimates for third-quarter profit. JPMorgan Chase raised its full-year forecast for net interest income and Goldman Sachs beat Wall Street expectations for quarterly profit. However, shares of both JPMorgan and Goldman Sachs, which have outperformed most rivals this year, fell 1.3% and 0.6%, respectively.  BlackRock's assets under management hit a record $13.46 trillion, lifting its shares 3.7%. U.S. President Donald Trump's trade war with China remained in focus for investors as the two countries began charging additional port fees on ocean shipping firms that move everything from holiday toys to crude oil. Global equities were shaken on Friday after Trump threatened 100% tariffs on Chinese goods after Beijing imposed controls on the export of rare earth minerals, although he softened his tone over the weekend. "The market is really struggling with where this shakes out," said Ross Mayfield, an investment strategist at Baird Private Wealth Management. "If the (Trump) administration feels like ramping up these tensions again, the market looks pretty expensive right now for that sort of fight, especially if 100% tariffs and other measures are back on the board." The U.S. labor market remained mired in its low-hiring, low-firing doldrums through September, though the economy overall "may be on a somewhat firmer trajectory than expected," Powell said in remarks prepared for delivery at a National Association for Business Economics conference. The S&P 500 was up 0.29% at 6,674.27 points. The Nasdaq declined 0.21% to 22,646.84 points, while the Dow Jones Industrial Average was up 0.91% at 46,488.75 points. Ten of the 11 S&P 500 sector indexes rose, led by financials, up 1.7%, followed by a 1.53% gain in industrials. Gains in industrial stocks supported the Dow. Caterpillar  jumped almost 5% after J.P. Morgan raised its price target on the stock. The International Monetary Fund marginally lifted its 2025 global growth forecast, as tariff shocks and financial conditions have proven more benign than expected, while warning that a renewed U.S.-China trade war could slow output significantly. Advancing issues outnumbered falling ones within the S&P 500 by a 5.4-to-one ratio. The S&P 500 posted 22 new highs and 10 new lows; the Nasdaq recorded 100 new highs and 91 new lows. (Reporting by Sukriti Gupta and Twesha Dikshit in Bengaluru, and by Noel Randewich in San Francisco; Additional reporting by Sinead Carew; Editing by Maju Samuel and Matthew Lewis)

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By Tatiana Bautzer, Nupur Anand and Manya Saini NEW YORK (Reuters) -Top U.S. bankers predicted business would continue to boom as equity markets surged over the last quarter and the economy and consumer spending held up despite sweeping tariffs, but some warned asset prices may be unsustainably high.  Goldman Sachs', investment banking revenue jumped 42% in the third quarter, while rival JPMorgan Chase's investment banking fees climbed 16%, the banks reported on Tuesday. Wells Fargo and Citigroup also put in solid IB performances.  Consumer finances remain healthy, with JPMorgan noting consumer delinquencies were trending below expectations, although executives said they were monitoring for any deterioration as labor market data weaken. "The macro environment reflects the global economy that's proved more resilient than many anticipated. The U.S. continues to be a pacesetter, driven by consistent consumer spending, as well as tech investments," Citigroup CEO Jane Fraser said during a conference call. "That said, there are pockets of valuation frothiness in the market." RECORD-HIGH MARKETS STIMULATE DEALS Wells Fargo Chief Financial Officer Mike Santomassimo told journalists the deals pipeline looked good. His counterpart at JPMorgan, Jeremy Barnum, said the bank enjoyed its busiest summer in M&A for a long time and that equity capital markets and initial public offering conditions were also strong heading into the fourth quarter.  Deals have been buoyed by higher asset prices, with U.S. equity markets repeatedly hitting records this year, driven by excitement over U.S. Federal Reserve interest rate cuts. However, that exuberance is causing concern that a major asset price correction is on the horizon. The International Monetary Fund on Tuesday also warned that markets were too complacent about trade and geopolitical risks. "A lot of assets (are) looking like they are entering bubble territory. But those prices fuel IB, equities, asset management," said JPMorgan JPM.N CEO Jamie Dimon. He said in credit markets, there were "early signs of some excess."  Wells Fargo surged 8% in afternoon trading, while Citigroup climbed 5%. Goldman Sachs and JPMorgan fell slightly. "Momentum continues across the majority of business lines with Wall Street remaining strong and the demand for consumer loans is very resilient," said Mac Sykes, a portfolio manager at Gabelli Funds. HIGHER INVESTMENT BANKING FEES Global investment banking fees reached a four-year high in the first nine months of the year, underpinning earnings.    “The thing about choppy waters is that they create opportunities, and the market volatility experienced over the past few months has created the perfect environment for U.S. investment banks to thrive,” said Danni Hewson, head of financial analysis at investment platform AJ Bell. Worldwide investment banking fees rose 9% to $99.4 billion so far this year, the highest since records were set in 2021, according to LSEG data.  M&A dealmakers were standout performers in the third quarter, particularly in technology and financial M&A, where fees increased 55% and 34%, respectively, the data showed.   In addition to buoyant equity markets and interest cuts, dealmaking has been spurred by lighter regulations under U.S. President Donald Trump, which offset the uncertainty from trade tensions that stalled activity earlier this year.  Executives said they expected more regulatory wins, as Trump's bank regulators overhaul capital rules. Global mergers and acquisitions surged 40% in the third quarter versus the previous year, according to Dealogic data. Megadeals also resumed, hitting a stunning $1.26 trillion.  The $55 billion acquisition last month of video game developer Electronic Arts by buyout group Silver Lake, Saudi Arabia's Public Investment Fund and Affinity Partners was the largest leveraged buyout in history.  The rebound in activity also led to a flurry of job-hopping by senior executives.  Even the U.S. government is contributing to the boom, with the Trump administration pursuing deals across up to 30 industries, involving dozens of companies deemed critical to national or economic security, Reuters reported this month.  "There is no question that there's a fair amount of investor exuberance," Goldman Sachs CEO David Solomon told analysts. "While I feel good about the forward outlook on balance, the market operates in cycles. Disciplined risk management is imperative." Global investment banking fees: Bank 2025 YTD 2024 YTD 2024 Wallet Rank share (%) JPMorgan 7.7 1 7.8 Goldman Sachs 6.3 2 6.1 Morgan Stanley 5.2 4 4.8 BofA 5 3 5.5 Citi 4.2 5 3.9 Barclays 2.7 6 2.9 Wells Fargo 2.5 7 2.3 Source: LSEG ​ (Reporting by Tatiana Bautzer, Nupur Anand, Manya Saini, Tatiana Bautzer, additional reporting by Pritam Biswas, Saeed Azhar, Arasu Kannagi Basil, Laura Matthews; Editing by Lananh Nguyen, Megan Davies, Michelle Price, Nick Zieminski, Rod Nickel)

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By Howard Schneider PHILADELPHIA (Reuters) -The U.S. labor market remained mired in its low-hiring, low-firing doldrums through September, though the economy "may be on a somewhat firmer trajectory than expected," Federal Reserve Chair Jerome Powell said on Tuesday, noting that policymakers will take a "meeting-by-meeting" approach to interest rate cuts as they balance job market weakness with above-target inflation. Powell, in remarks to a National Association for Business Economics conference in Philadelphia, acknowledged the economic dilemma that has split U.S. central bank officials almost evenly among those concerned most about still-high and potentially rising inflation, and those worried the labor market may be facing a fast slide downward. A newly added complication, Powell said, is that recent data on economic activity have been stronger than expected, but that hasn't yet translated into renewed hiring strength. "You do have a bit of tension between labor market data – we see very low levels of job creation – and yet people are spending," Powell said. "We are going to have to see how that plays out." The analysis, for now, will be done in the absence of official data largely suspended by the U.S. government shutdown. Powell said he felt there was adequate insight for the Fed's coming October 28-29 meeting, but that "we'll start to miss that data, particularly October data," if the shutdown persists. But for the time being, Powell said, there is a broad-enough array of public and private information to make a policy judgment, with the Bureau of Labor Statistics recently told by the Trump administration that it could release its Consumer Price Index report for September. It is now due to be published on October 24, ahead of the Fed's next policy meeting. "Based on the data that we do have, it is fair to say that the outlook for employment and inflation does not appear to have changed much since our September meeting four weeks ago," at which the Fed cut its benchmark interest rate by a quarter of a percentage point, Powell said. "Data available prior to the shutdown, however, show that growth in economic activity may be on a somewhat firmer trajectory than expected." His remarks did not change the near unanimous consensus among investors that the Fed would cut its policy rate by another quarter of a percentage point in two weeks. Powell is "saying that the economy is on solid footing, but he's also saying we have weakness … He's preparing the markets for a series of rate cuts, but not necessarily in a sequential order," said Peter Cardillo, chief market economist with Spartan Capital Securities in New York. "He'll cut by 25 basis points at the end of this month, then they'll assess." 'NO RISK-FREE' POLICY PATH Powell noted the "healthy debate" within the Fed, reflected in recent projections that showed about half of its policymakers expecting only one or no more rate cuts this year, and the rest projecting two or more. It's a sign of the tradeoffs the Fed is facing between securing its 2% inflation target and protecting the job market. "There is no risk-free path for policy as we navigate the tension between our employment and inflation goals," Powell said, noting that the policy projections issued by Fed officials every three months "should be understood as representing a range of potential outcomes whose probabilities evolve as new information informs our meeting-by-meeting approach to policymaking." Even with the September jobs report delayed, Powell, who devoted most of his formal remarks on Tuesday to a discussion of Fed balance-sheet policy, said he drew from a variety of public and private data sources for insight on the job market. "While official employment data for September are delayed, available evidence suggests that both layoffs and hiring remain low, and that both households' perceptions of job availability and firms' perceptions of hiring difficulty continue their downward trajectories," Powell said. The elevated inflation, he said, was partly due to rising goods prices that "primarily reflect tariffs rather than broader inflationary pressures." (Reporting by Howard Schneider; Editing by Paul Simao)

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WASHINGTON (Reuters) -A shutdown of the U.S. government could hinder the accessibility of insurance coverage to prospective homeowners in flood-prone areas, and cost the already struggling housing market billions of dollars in delayed contract closings, data showed on Tuesday. The report from HomeAbroad, a real estate investment technology platform, estimated that about 3,619 home closings were at risk nationwide daily, translating to roughly a loss of $1.59 billion based on the current $439,278 median home price. The National Flood Insurance Program, which helps to provide coverage for properties in high-risk areas, has suspended services during the shutdown, now entering its third week. Numerous government services have been impacted by the shutdown, which was triggered by a lapse in funding amid a political standoff between Republicans and Democrats in Washington. "This represents the largest potential disruption to the U.S. housing market from a single policy intervention in recent history," said Michele Lawrie, real estate consultant at HomeAbroad. "The economic scale of this shutdown extends far beyond individual homebuyers." The housing market has been battered by higher mortgage rates as the Federal Reserve hiked interest rates to curb inflation. Though mortgage rates have declined as the U.S. central bank resumed lowering borrowing costs last month, an uncertain economic outlook marked by a lethargic labor market has sidelined many prospective homeowners. HomeAbroad projected that a two-week-long shutdown would put 50,658 home closings at risk, with an estimated economic loss of $22.27 billion. A one-month-long shutdown was seen threatening 108,570 home closings, costing an estimated $47.68 billion. The longest government shutdown was in 2018-2019 and lasted 35 days. "A shutdown of similar length today could potentially delay over 126,000 home closings, threatening more than $55 billion in housing market transactions, illustrating the high stakes involved," said Lawrie. HomeAbroad estimated eight states including Maryland, Virginia, North Carolina and Florida, could see more than half of their home sales disrupted as they were highly vulnerable because of elevated flood insurance penetration rates.  (Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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By Diana Novak Jones (Reuters) -A U.S. judge on Tuesday rejected Humana's bid to challenge the Centers for Medicare & Medicaid Services' 2025 ratings for its Medicare Advantage plans, which could cost the health insurance company millions of dollars in bonus payments from the government.  U.S. District Judge Reed O'Connor in Fort Worth, Texas, sided with the U.S. Department of Health and Human Services in Humana's lawsuit over a reduction in the so-called star ratings for its Medicare Advantage plans, saying CMS properly evaluated the plans. A spokesperson for Humana said the company would explore all legal options. The company remains "committed to delivering meaningful improvements to our Star measurements and returning to top quartile performance as quickly as possible," the spokesperson said in a statement. A spokesperson for HHS, which oversees CMS, said the agency does not comment on litigation. Humana is one of the largest providers of Medicare Advantage plans in the U.S., which are funded by the Medicare health insurance program for seniors and some disabled people but administered by private insurers. CMS issues ratings for the plans, from one to five stars, to help beneficiaries choose. Plans with higher star ratings receive higher payments from the government if they keep costs below certain targets, payouts that can be worth hundreds of millions or billions of dollars. Humana shares were off 3.6% in afternoon trading at $261.11 and are down nearly 12% this week. Humana sued over the 2025 star ratings in July. It claimed its 3.5-star rating could cause it to lose customers and potentially billions of dollars in bonus payments, which it said would have been used to reduce premiums and increase benefits for its members.  The lawsuit came after O'Connor dismissed an earlier challenge to the star ratings, saying the company failed to exhaust all of its administrative remedies. The company challenged the way the ratings were calculated, saying its rating was unfairly slashed after a CMS test of its phone support for people with limited English proficiency. It sought an order directing CMS to set aside Humana's 2025 ratings and recalculate them. HHS said problems with Humana's customer service phone line were a fair way to judge the company's accessibility for its customers, according to court filings. In Tuesday's ruling, O'Connor rejected Humana's argument, saying the guidance on how the calls are evaluated was not arbitrary or capricious under federal law. (Reporting by Diana Novak Jones; Additional reporting by Amina Niasse in New York; Editing by Mark Porter, Alexia Garamfalvi and Bill Berkrot)

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By Tassilo Hummel and Mimosa Spencer PARIS -LVMH's sales increased by 1% in the third quarter, driven by improved demand in China, offering some solace to a luxury goods sector grappling with a prolonged slump. The rise reported by LVMH on Tuesday represents the first quarter of growth this year for the world's largest luxury goods group, which is seen as a sector bellwether with operations spanning fashion, alcohol and retail. LVMH said in a statement that trends in Asia excluding Japan, a market dominated by China, showed "noticeable" improvement nine months into the business year. "Mainland China turned positive in Q3," LVMH Chief Financial Officer Cecile Cabanis told analysts in a call. Cabanis cautioned that LVMH faces headwinds in the fourth quarter, including unfavorable currency rates and ongoing economic uncertainty, but said the group was confident with the new creative direction its brands are taking.  Sustained financial improvement will "take time" with "gradual sequential improvement", added Cabanis.  LVMH US SHARES JUMP LVMH's U.S. shares were up 7.5% on Tuesday. "The results indicate a combination of self-help and slightly more positive Chinese demand, possibly on a U-shaped recovery trajectory," said Bernstein analysts, noting a "strong beat" across divisions. Sales at the fashion and leather goods division, home to flagship brands Louis Vuitton and Dior and accounting for more than two-thirds of profits, were down 2% versus a year earlier. The trading update beat a Visible Alpha consensus cited by HSBC that had seen flat overall sales and a 4% decline for the fashion and leather division. Quarterly sales at the conglomerate controlled by French billionaire Bernard Arnault, which also owns brands such as jeweller Tiffany, Moet & Chandon champagne and beauty retailer Sephora, rose 1% to 18.28 billion euros ($21.17 billion). The decline in the group's all-important fashion and leather division in the July to September period marked an improvement from the 9% drop posted after the second quarter. MORE INVESTORS TURN POSITIVE ON LUXURY The luxury sector has undergone a prolonged slump since the winding down of the post-pandemic boom.  Price hikes, which fuelled profits at labels including Louis Vuitton and Dior in recent years, have weighed on appetite for handbags, especially from less wealthy clients. Economic factors including U.S. President Donald Trump's tariffs, the continuing real estate crisis in China and a recent surge in gold and silver prices, driving up production costs for jewellery, have added to the headwinds.  However, the update from the first major player in the $400-billion luxury industry to report third-quarter sales comes as more investors have turned positive on the sector. Analysts have released a series of optimistic notes, saying brands' push for more affordable products and what Morgan Stanley called a "burst of creativity" from new designers at most houses could mean the worst is over. LVMH recently undertook a string of personnel changes as Arnault moved around some of his lieutenants and designers in the face of a challenging business climate, including at Dior, Celine, Loewe and most recently Fendi. Shares in LVMH are up 13% since the group's last trading update on July 24. The rally lifted LVMH, which briefly lost its crown as France's most valuable company to rival Hermes this year, back to the top as analysts began seeing positive signs for luxury sales beyond the very high end.  (Reporting by Tassilo Hummel and Mimosa Spencer; Editing by Joe Bavier, Lisa Jucca and Alexander Smith)

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