Five Things You Need to Know to Start Your Day

(Bloomberg) --

The U.S. and China may be close to “doing something’ on trade, according to President Trump. The Federal Reserve sees another rate increase “fairly soon.” And bond traders around the world are repricing their outlook for growth. Here are some of the things people in markets are talking about.

Close to ‘Something’ on Trade

President Donald Trump said he is very close to “doing something” with China ahead of a planned meeting with President Xi Jinping, raising expectations again that the two leaders may be able to hash out a ceasefire in their trade war. U.S. and Chinese officials have been working for weeks on the contours of a possible deal for the two leaders to be announced following their dinner on Saturday on the sidelines of the Group of 20 summit in Buenos Aires and a road map for talks to follow. Those discussions, according to people familiar with them, have centered on the possibility of a truce in which the U.S. would delay ramping up tariffs on China in exchange for Chinese concessions. The two leaders would also agree on a “framework” for further talks, U.S. officials such as Commerce Secretary Wilbur Ross have said publicly.

Fed Meeting Minutes

Federal Reserve officials  saw another interest-rate increase as likely warranted “fairly soon” even while they set the stage for more flexibility in their hiking trajectory going forward, according to the minutes of their Nov. 7-8 meeting.  Fed Chairman Jerome Powell said it might be appropriate to reprise the kind of adjustment that the central bank made in June to ensure that the effective fed funds rate remains “well within” the central bank’s target range -- and such a move could even come before the December policy meeting if necessary. Meanwhile, the rising number of Americans filing for unemployment benefits is starting to worry some economists, though the latest increases came during holiday periods typically associated with data volatility. And U.S. pending home sales declined to a four-year low in October.

Deutsche Bank Raided

Deutsche Bank’s headquarters in Frankfurt were searched by prosecutors in a money-laundering probe. While suspicions stem from the 2016 disclosures known as the Panama Papers, the investigation covers the five-year period from 2013 to 2018, a spokeswoman for Frankfurt prosecutors said. The main suspects in the probe, focused on a unit in the British Virgin Islands that processed 311 million euros ($354 million) in 2016 alone, were two bank employees identified by their ages -- 50 and 46. One works in the anti-financial crime office. The raid adds to a panoply of headaches -- commercial, regulatory and legal -- facing the beleaguered German lender. The stock has lost almost half its value this year, after sliding more than 3 percent on Thursday. 

China’s P2P Lending Purge

China is preparing to end its $176 billion experiment with peer-to-peer lending. Alarmed by a surge in defaults, fraud and investor anger, Chinese authorities are planning to wind down small- and medium-sized P2P lending platforms nationwide, people with knowledge of the matter said. Regulators may also order the largest platforms to cap outstanding loans at current levels and encourage them to reduce lending over time, one of the people said, asking not to be identified discussing private deliberations. Shares of P2P platform operators sank in New York. The planned shakeout, which broadens a city-level purge in the P2P hub of Hangzhou, is the clearest sign yet that Chinese leaders want to dramatically shrink a market that spawned the nation’s biggest Ponzi scheme, protests in major cities, and life-altering losses for thousands of savers.

Slow Down There

It’s not just in the U.S. that confidence in higher interest rates is faltering. Bond and money market traders around the world are reassessing the pace of tightening amid signs global growth is sputtering. Traders were cutting back bets on Federal Reserve hikes in 2019 even before dovish remarks from Chairman Powell opened the door for a potential pullback next year. Meanwhile, the European Central Bank’s long-anticipated rate increase is looking less likely, while the probability of a move in Australia is continually being pushed back. Central banks may have good reason to turn more dovish. The International Monetary Fund downgraded its forecast for world growth last month, and warned this week that the outlook may have gotten even worse. That’s been reflected in increasing financial market turbulence, with stocks sinking in the fourth quarter and credit spreads widening. Meanwhile, falling oil prices are taming inflation expectations.

What we’ve been reading

Here’s what caught our eye over the past 24 hours.

• The battle to attract Chinese consumers is hammering stocks.
• If you want a lunch with crypto advocate Michael Novogratz, now's your chance.
• A scorecard for Imran Khan's first 100 days as Pakistan's leader.
• A killer pig virus is closing in on Beijing and Shanghai.
• Large-cap U.S. mutual funds are losing badly to their benchmarks.
• This steel company plans to save the ocean with its molten waste.
• How an Instagram influencer makes a living.

To contact the editor responsible for this story: Boris Korby at bkorby1@bloomberg.net

©2018 Bloomberg L.P.