Five Things You Need to Know to Start Your Day
All eyes on China amid a move to shore up yuan and as trade war tit-for-tat continues, North Korea sanctions being debated and markets set to open higher. Here are some of the things people in markets are talking about.
China in Spotlight
China’s markets will be closely watched Monday after fresh salvos were fired in the trade war and as a support measure for the yuan announced on Friday takes effect. The People’s Bank of China said it will impose a reserve requirement of 20 percent on some trading of foreign-exchange forward contracts. That will effectively make it more expensive to short the yuan, which rallied on the news. Officials released a list of $60 billion in U.S. goods that Beijing intends to hit with tariffs, in retaliation for the Trump administration’s plan to impose duties on $200 billion in Chinese imports. Meanwhile, U.S. President Donald Trump said that the U.S. now has the upper hand in the tariff battle and that playing hardball on trade is “my thing.”
North Korea Sanctions
U.S. Secretary of State Michael Pompeo warned against easing up on sanctions until North Korea gives up its nuclear weapons, drawing a rebuke from the regime that underscored how far apart the two sides remain almost two months after their leaders met in Singapore. Back in Singapore for a regional security forum, Pompeo on Saturday called out Russia and China, highlighting reports that they are violating United Nations Security Council resolutions restricting trade with North Korea. While Pompeo said he remains “optimistic that we will get this done,” North Korean Foreign Minister Ri Yong Ho struck a far more confrontational tone in a statement he read and challenged the U.S. position that North Korea won’t get sanctions relief until it disarms. White House National Security Adviser John Bolton added to the debate, saying the U.S. is not `` starry-eyed about’’ North Korea.
China trade and Japan growth are this week's Asia highlights. The initial impact of U.S. tariffs on $34 billion of Chinese goods may show up in July's trade report, which is expected to record a $39.05 billion surplus. Japan's second-quarter GDP may rise an annualized 1.4 percent, according to consensus, rebounding from the prior period's 0.6 percent contraction and indicating a move toward reflation. Tuesday will bring the latest Reserve Bank of Australia meeting to produce no change in either the record-low cash rate or the long-term guidance. The Bank of Japan releases a summary of opinions from its July 30-31 meeting, which may garner a lot of interest as bond traders worldwide strive to work out what the Japanese central bank is aiming to achieve. There will also be a Thailand rates decision. Thursday also has plenty to keep traders on their toes, with a New Zealand rates meeting early in the morning. Japanese and Hong Kong GDP, China data on money and credit, and the RBA's quarterly statement on monetary policy rounds out the week in Asia before U.S. CPI.
Stocks to Gain
Equity markets pointed higher in China, Hong Kong, Australia and small gains are indicated for Japan. The 10-year Treasury yield ticked back to 2.95 percent on Friday, while the dollar edged lower. The S&P 500 Index extended its weekly winning streak to five Friday on the back of U.S. jobs data, which showed 157,000 jobs were added – below estimates – and the unemployment rate fell to 3.9 percent. The yuan will be closely watched as the week's trading kicks off. The PBOC's defence of the yuan, which triggered a rally in the currency on Friday, has echoes of a similar move to deter short sellers at the start of 2016.
Taiwan Semiconductor Manufacturing Co., which makes chips for the iPhone and other devices, detailed its progress in recovering from a debilitating computer virus and warned of delayed shipments and reduced revenue because of the impact on its factories. TSMC said that 80 percent of the fabrication tools affected by a virus outbreak Friday evening had been restored and that it expects full recovery on Monday, an emailed statement shows.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- Here are three reasons to short Australia's dollar.
- Another powerful quake rocks Indonesia’s Lombok.
- 3 percent presents a hurdle for U.S. 10-year Treasury yield.
- Indonesia’s 7 percent growth target is a dream.
- U.S. gas targeted, making China’s environmental goals costlier.
- SoftBank’s Son in his own words. All 303,513 of them.
- Here's why Prada can charge $1,700 for a shirt with bananas on it.
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