Five Things You Need to Know to Start Your Day

(Bloomberg) --

The rout in tech stocks deepened, with losses nearing $300 billion since Facebook reported last week. Bonds dropped as investors await Tuesday’s BOJ decision. Here are some of the things people in markets are talking about.

‘Tired’ Tech Drags on Stocks

The biggest technology shares led a retreat in stocks as investors showed signs of exhaustion with the sector amid a slew of corporate earnings. Government bonds declined and oil rallied. The Nasdaq Composite Index sank more than 1 percent and neared its average price of the past 50 days, which technical analysts consider a key level of support. The FANG cohort tumbled as much as 3 percent, led by Netflix Inc. The bloodletting in tech shares was nearing the $300 billion mark since Facebook’s earnings hit July 25, prompting the biggest market-cap decline in U.S. history. The dollar sank, as the euro, pound and kiwi advanced. U.S. oil futures climbed above $70 for the first time in more than a week as a weaker greenback boosted commodities.

Global Bonds Drop as Investors Await Kuroda

Bonds across global developed markets declined ahead of the Bank of Japan’s policy decision Tuesday on growing speculation that officials may adjust policy stimulus. U.K. gilts led the drop, with 10-year yields touching the highest level in nearly a month, while U.S. Treasuries and German bunds followed suit. Yields on similar-dated Japanese bonds rose to an almost 18-month high during Asian hours before the BOJ offered to buy an unlimited amount of securities for the third time in a week. Speculation that Governor Haruhiko Kuroda could permit yields to fluctuate more around the BOJ’s zero percent target or remove its current bond-purchase target has rippled across global markets over the past week. Any winding back of stimulus would strengthen the yen and undermine efforts to boost domestic inflation that is well below the central bank’s 2 percent target. Here’s what to expect.

Pompeo Knocks China

Secretary of State Michael Pompeo took not-so-subtle digs at China in pitching U.S. commitment to a “free and open” Indo-Pacific region despite President Donald Trump’s decision last year to pull out of the Trans-Pacific Partnership trade agreement. Pompeo, speaking Monday at the U.S. Chamber of Commerce before a trip to Asia, said the U.S. believes in “strategic partnerships, not strategic dependency,” a veiled criticism of China’s efforts to woo countries with cheap financing for infrastructure projects and its Belt and Road Initiative, a project aimed at forging new economic ties with Europe, Asia and Africa. “With American companies, citizens around the world know that what you see is what you get: honest contracts, honest terms and no need for off-the-books nonsense,” Pompeo said. Another advantage of the U.S., he said, is that “we will help them keep their people free from coercion or great power domination.” Meanwhile, Commerce Secretary Wilbur Ross compared the U.S.-China trade spat to the “painful” start of a diet.

Pakistan’s Rupee Soars

Pakistan’s rupee jumped the most in a nearly a decade after reports that China had lent the nation $2 billion to shore up its depleting foreign-exchange reserves. The currency rose 3 percent to close at 124 per dollar in Karachi, the most since October 2008, according to data compiled by Bloomberg, paring a downward trend this year after the rupee was devalued four times since December. The Karachi-based Express Tribune newspaper reported over the weekend that Beijing authorized the loan, while the Islamic Development Bank activated a three-year $4.5 billion oil-financing facility, citing unnamed finance ministry officials.

Coming Up...

While Kuroda will probably steal the spotlight, other data include China manufacturing PMI and industrial output figures from South Korea and Japan. All three are forecast to show softer outcome, potentially adding to angst about a moderation in the region’s key economies amid trade frictions. The IEA will also release its World Energy Balances report for 2018.

What we’ve been reading

This is what caught our eye over the last 24 hours.

• A correction bigger than February’s is building, Morgan Stanley says.
• North Korea is building new missiles, the Washington Post reports.
• China’s top diplomat mocked “perplexing” U.S. complaints on trade.
• He also said he’s committed to the “one country, two systems” governing framework in Hong Kong.
• Flight MH370 was “manipulated” off its course to its demise, according to a new report.
• China’s MeToo movement is gaining force.
• A look into summer camp for the ultra wealthy that teaches rich kids how to stay rich.

To contact the editor responsible for this story: Cormac Mullen at cmullen9@bloomberg.net

©2018 Bloomberg L.P.