Five Things You Need to Know to Start Your Day
The U.S. thinks they’re making progress on a “Phase One” trade deal, there were widespread arrests in Hong Kong, and banks are struggling to set a value on Saudi Aramco. Here are some of the things people in markets are talking about today.
Commerce Secretary Wilbur Ross expressed optimism the U.S. would reach a “Phase One” trade deal with China this month and said licenses would be coming “very shortly” for American companies to sell components to Huawei Technologies Co. “We’re in good shape, we’re making good progress, and there’s no natural reason why it couldn’t be,” Ross told Bloomberg Television’s Haslinda Amin in an interview on Sunday in Bangkok, when asked if the deal is on track to be signed this month. “But whether it will slip a little bit, who knows. It’s always possible.” President Donald Trump on Sunday told reporters at the White House that a trade agreement, if one is completed, would be signed somewhere in the U.S. “First of all I want to get the deal,” he said after returning for a trip to New York City. “The meeting place, to me, is going to be very easy.”
Stocks were set to rise in Asia after a strong U.S. hiring report Friday and positive signs on an interim U.S.-China trade deal. The yuan was steady, while the Aussie climbed. Futures pointed higher on equity indexes in Hong Kong and Australia after the S&P 500 rose 1% on Friday to a fresh all-time high as data showed the economy added more jobs than forecast. South Africa’s rand advanced after the country clung on to its investment-grade credit rating. Markets are shut in Tokyo Monday, so Japanese equities won’t trade and cash Treasuries will begin at the London open. Elsewhere, gold added 0.1% on Friday to $1,514.34 an ounce, and crude on Friday gained 3.7% to $56.20 a barrel.
More mayhem in Hong Kong. At least 200 people there were arrested as protesters seeking greater democracy and police accountability blocked roads, vandalized public facilities and set alight exits of subway stations, the unrest lasting all weekend. On Saturday, police fired multiple rounds of tear gas and deployed a water cannon on black-clad demonstrators who built barricades across busy streets, including a highway, and threw flaming objects in the Wan Chai neighborhood. Petrol bombs were also thrown. On Sunday, police and protesters clashed at malls full of afternoon shoppers, with riot police using pepper spray and detaining several people. A Mandarin-speaking man also attacked several people with a knife at Cityplaza shopping center — and bit off part of pro-democracy district councilor Andrew Chiu’s ear, RTHK reported. Meanwhile, Hong Kong Chief Executive Carrie Lam said the recent unrest has “inevitably affected the confidence of local and overseas sectors” toward the city, but its “unique edge” is unharmed under the “One Country, Two Systems” principle.
Saudi Aramco may be worth as little as $1.5 trillion or even less, according to research sent on Sunday to potential investors by the banks involved in the company’s initial public offering. That’s well below the target set by the kingdom. The research, according to multiple investors who reviewed it, suggests the banks are struggling to pinpoint a precise valuation for Aramco. Some banks offered a huge range — as much as $1 trillion in the case of Bank of America — between their low and high estimates. The pre-IPO research reports, which the banks use to drum up interest on share sales, suggest Riyadh may struggle to achieve the $2 trillion valuation that Saudi Crown Prince Mohammed bin Salman has publicly desired over the last three years. The IPO process officially started Sunday, with the company filling a so-called intention to float document. The stock is likely to start trading in Riyadh in December.
More Harm Than Good
Australia’s monetary policy easing has driven interest rates down to levels where they could be doing more harm than good for the economy. The central bank could be bumping up against the “reversal interest rate,” a level at which accommodative policy begins to produce unintended consequences. The clearest sign of that is the slide in consumer sentiment since the Reserve Bank began lowering rates in June. It’s against that backdrop that economists and money markets predict Governor Philip Lowe will likely pause Tuesday and keep the cash rate at 0.75%.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
- McDonald’s fires its CEO over a relationship with an employee.
- This economy will grow 86% in 2020, the IMF says.
- The secret weapon that made the Philippine peso so strong.
- Berkshire profit hits a record as Warren Buffett’s cash pile grows.
- Boris Johnson says sorry for failing to deliver Brexit by October 31st.
- Prince Charles may be caught up in a $136 million fake art hoax.
- There’s a dark side to zero-cost investing.
- How Asia’s millennials are learning to stay rich forever.
©2019 Bloomberg L.P.