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Chinese shares go global. Trump’s ZTE reversal catches Washington off guard. And Middle East clashes turn deadly. Here are some of the things people in markets are talking about.
Dollar Rises as Treasuries Slump
U.S. stocks pared early gains in thin trading Monday, while technology indexes remained higher, boosted by President Donald Trump’s easing of tension in a trade spat with China. Treasuries slipped amid a selloff in German debt following hawkish comments from European Central Bank policy maker Francois Villeroy de Galhau, who signaled that he expects bond purchases to end this year and an interest-rate hike could follow in 2019. The curve steepened. The Bloomberg Dollar Spot Index climbed 0.2 percent, yet strategists warn of mounting bearish conditions for the currency: paltry domestic inflation, economic resilience overseas and the potential escalation of tariff disputes.
Chinese Shares Hit the Global Stage
MSCI Inc. released the list of 234 domestically listed Chinese companies that will be added to benchmark equity gauges from next month. Inclusion spread across two trading days in June and September, is expected to channel around $17 billion in passive funds into the world’s second-biggest equity market, the index compiler has previously estimated. While Chinese stocks with New York and Hong Kong listings — such as Alibaba Group Holding Ltd. and Tencent Holdings Ltd. — have long been on MSCI’s global gauges, international retirement plans, endowments and exchange-traded funds will be forced to buy the nation’s yuan-denominated shares for the first time. Still, the initial impact will be mild with the new additions squeezed into a 0.39 percent weighting on the MSCI Emerging Markets Index. Here’s more on what MSCI inclusion means.
U.S., China Near ZTE Deal
Trump’s conciliatory move to help Chinese telecom equipment maker ZTE Corp. stoked bipartisan condemnation in Washington Monday, as lawmakers warned the U.S. president’s concession could endanger national security. Trump shocked many in Washington with a tweet Sunday that he was working with Chinese President Xi Jinping to give ZTE “a way to get back into business, fast.” Commerce Secretary Wilbur Ross said the U.S. is exploring alternatives to punish China’s ZTE Corp. for breaking sanctions law separately from trade negotiations that resume this week. The two countries were nearing a deal that would give ZTE reprieve from U.S. sanctions in exchange for China removing tariffs on billions of dollars of agricultural products, the Wall Street Journal reported.
Trump, Kim on Collision Course Ahead of Summit
President Donald Trump and North Korean leader Kim Jong Un appear to be on a collision course over what comes first: disarmament or sanctions relief. On Sunday, two of Trump’s top national security officials — Secretary of State Mike Pompeo and National Security Adviser John Bolton — both said the U.S. needs proof that North Korea’s denuclearization is complete, verifiable, and irreversible before sanctions are lifted. By contrast, Kim has called for a step-by-step process to rid the Korean Peninsula of nuclear weapons. Bridging that gap is crucial for a successful outcome when Trump and Kim meet in Singapore on June 12. Trump has insisted he won’t repeat the mistakes of the past, when agreements for North Korea to give up its nuclear weapons broke down due to disputes over inspections and the delivery of economic aid.
China releases industrial output and retail sales data Tuesday that could shed more light on whether its economy can regain a bit of momentum. Australia’s central bankers will be busy, with Deputy Governor Guy Debelle delivering an early morning speech on the outlook for the Australian economy and then minutes from this month's RBA policy meeting a couple of hours later. Trade data for Indonesia and India and figures on Philippines remittances are also expected. In the U.S., China Vice Premier Liu He arrives in Washington for trade talks.
What we’ve been reading
This is what’s caught our eye over the last 24 hours.
- More than 50 Palestinians have been killed in confrontations with Israeli troops.
- Goldman Sachs lost its two most experienced trading leaders.
- A top Fed official said you can blame the central bank for the flattening yield curve.
- A $5 billion manager says this time it’s different with North Korea.
- Malaysia’s Premier Mahathir will face his first big test as Anwar Ibrahim is freed.
- Samsung is trying again to chip away at Apple’s iPhone patent award.
- Take a look inside London’s fight club for the rich.
©2018 Bloomberg L.P.