Five Things You Need to Know to Start Your Day
The yuan’s slide has traders on high alert, Trump takes a jab at the Fed’s interest-rate policy, and yield curves around the world are getting flatter. Here are some of the things people in markets are talking about.
Yuan’s Descent Has Investors, Trump on Alert
The market turmoil spurred by the Chinese yuan’s tumble to a one-year low is putting traders on alert during the normally sleepy northern summer. As the onshore yuan plunged 0.9 percent Thursday, its biggest drop since 2015 on a closing basis, it took most Asian currencies along for the ride amid broad dollar strength. Considering America first, President Donald Trump told CNBC that the currency is “dropping like a rock” and putting the U.S. at a disadvantage. Meanwhile, copper slid below $6,000 a metric ton for the first time in a year, slumping along with other industrial metals and shares of mining companies.
Trump Treads on Fed
The U.S. president also used his CNBC airtime to criticize the Federal Reserve’s interest-rate increases, breaking with more than two decades of White House tradition of avoiding comments on monetary policy out of respect for the independence of the U.S. central bank. “I’m not thrilled” the Fed is raising borrowing costs and potentially slowing the economy, he said. “I don’t like all of this work that we’re putting into the economy and then I see rates going up.’’ Trump said that “at the same time I’m letting them do what they feel is best.” The dollar relinquished gains from earlier in the day following the remarks.
Curve Flattening Goes Global
From the U.K. to Indonesia, global bond investors have been joining their U.S. counterparts in driving yield curves flatter, adding to signs that escalating trade tensions are depressing expectations for economic growth and inflation. Fed rate hikes kicked off the trend, but now other central banks are tightening policy, and developing economies have had to act to support sliding currencies. The upshot is that short-term rates are rising faster than longer maturities in a slew of markets worldwide, a potential source of concern for officials wary of the recessionary signals that curve flattening sends.
Guess Who’s Coming to Dinner
Trump invited Russian President Vladimir Putin to Washington for a summit in the fall. “In Helsinki, @POTUS agreed to ongoing working level dialogue between the two security council staffs,” White House Press Secretary Sarah Sanders said in a tweet Thursday. “President Trump asked @AmbJohnBolton to invite President Putin to Washington in the fall and those discussions are already underway.” Sanders announced the invitation less than an hour after the Republican-led Senate effectively rebuked Trump for considering Russia’s request to question U.S. officials, giving voice to growing unease over the president’s relationship with Putin following their summit in Helsinki on Monday.
Goldman’s 1MDB Role Is Subject of Banker’s Plea Talks
U.S. prosecutors negotiating a possible deal with a former Goldman Sachs Group Inc. executive are pressing for information about whether the bank turned a blind eye to the plunder of the Malaysian investment fund 1Malaysia Development Bhd., or 1MDB, according to a person familiar with the matter. If they reach a plea agreement with Tim Leissner, the Goldman banker who arranged the fund’s bond offerings, he would become a key witness against his superiors at the bank, said the person, who asked not to be identified because the matter isn’t public. The U.S. Justice Department hasn’t brought any criminal charges in the running scandal over more than $4 billion said to have been looted from 1MDB on the watch of then prime minister Najib Razak.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- Technicals are signaling the rout in commodities has legs.
- JPMorgan says America’s bull market could last until 2020.
- China is sitting on world's biggest shale gas prize. The hard part is pumping it out.
- China fires back at the U.S. after accusations it is stalling trade talks.
- Trump's spy chief says “I don't know” what unfolded in talks with Putin.
- Investing in fine wine is more lucrative than ever.
©2018 Bloomberg L.P.