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(Bloomberg) --
The U.S. wades into Hong Kong tensions, China is laying down the rules of play in trade talks, and things are looking up on the Brexit front. Here are some of the things people in markets are talking about today.
Bill of Support
The U.S. House gave support to pro-democracy protesters in Hong Kong by passing a bill that would require an annual review of whether the city is sufficiently autonomous from Beijing to justify its special trading status under U.S. law. The Hong Kong Human Rights and Democracy Act is one of four measures passed by the House Tuesday. It provides for sanctions against officials “responsible for undermining fundamental freedoms and autonomy in Hong Kong.” Thousands of protesters gathered on Monday in Hong Kong’s central district to support the legislation, many of them waving American flags. The timing is sure to inject more tension into an already delicate state of affairs in the U.S.-China trade talks. Beijing strongly opposed the move, saying it “grossly interferes in China’s internal affairs.”
Tariff Tensions
Beijing is laying down more rules of play in its trade war with the U.S. Chinese officials want a rollback in tariffs before they can feasibly agree to buy as much as $50 billion of American agriculture products, people familiar with the matter said — exports that were part of the initial deal, according to President Donald Trump. Although China is willing to start purchasing more U.S. agricultural products as part of the “phase one” trade deal, it is not likely to reach the $40 billion to $50 billion under current circumstances, the people said, asking not to be identified. Washington had said China, which imported about $20 billion of U.S. farm goods in 2017, agreed to make large agricultural purchases in exchange for relief on upcoming tariffs. Beijing’s position makes a deal more complex than initially described.
Markets Optimism
Asia stocks looked set to gain Wednesday after their U.S. peers touched four-week highs as earning season got underway. The pound strengthened amid much-needed good news in the Brexit saga. Futures were higher in Tokyo, Sydney and Hong Kong, while the S&P 500 Index topped 3,000 on an intraday basis for the first time in three weeks. Treasuries retreated, with 10-year yields close to four-week highs, amid the risk-on backdrop. Crude oil fell for a second day and gold dropped. Elsewhere, the Turkish lira jumped and the country’s benchmark stock index rose after Trump imposed milder penalties over its military campaign in Syria than U.S. lawmakers had demanded.
Closing In on a Deal?
The latest developments in the on-again, off-again Brexit saga are looking more promising — for now. U.K. and European Union negotiators are closing in on a draft deal amid optimism there could be a breakthrough before the end of Tuesday, two EU officials said. They cautioned talks haven’t yet finished, and there could be problems hitting the midnight deadline. But there are clear signs that a legal text is close to being ready. The aim would be to present the draft to national delegations on Wednesday morning, an EU diplomat said. Still, Prime Minister Boris Johnson will need to secure the agreement of the U.K. Parliament. Negotiators have approached, and even managed to strike, a Brexit deal before — only to see it shot down in London. Nevertheless, the pound surged to the highest level in nearly four months.
BOJ Rebuffs Bonds
The Bank of Japan is on course for an historic turning point: Its bond holdings will shrink next year for the first time in a decade, according to a Bloomberg News analysis. It’s all the more notable given that the European Central Bank and Federal Reserve are set to once again increase their balance sheets. It’s a remarkable shift for a central bank that has refused to drop guidance for boosting government debt holdings by 80 trillion yen ($740 billion) annually, even as it steadily tapers purchases since pivoting to yield-curve control in 2016. The long-term implications for the world’s second-largest sovereign bond market will be far-reaching if, as the analysis suggests, the BOJ’s debt holdings start to shrink from next August — when the central bank’s purchases will fall short of redemptions, theoretically reducing downward pressure on yields.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
- Turkey’s Halkbank has been charged with fraud, money laundering and violating U.S. sanctions against Iran.
- The U.S. Budget Office won’t provide Ukraine records, in the latest on the impeachment probe.
- How Hong Kong’s taxes spawned billionaires and bred inequality.
- India is planning to train women to combat water quality challenges.
- Beijing has almost as many electric car chargers as the entire U.S.
- Feeling risky? WeWork bonds would be for the bravest of the brave.
- Indonesia’s mandatory halal labeling is leaving firms in disarray.
To contact the editor responsible for this story: Alyssa McDonald at amcdonald61@bloomberg.net
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