Five Things You Need to Know to Start Your Day
Trump, trade, and developing-nation turmoil make for a busy Thursday. Here are some of the things people in markets are talking about.
A WTO Without the U.S.?
President Trump said he would pull out of the World Trade Organization if it doesn’t treat the U.S. better, continuing his criticism of a cornerstone of the international trading system. “If they don’t shape up, I would withdraw from the WTO,” Trump said Thursday in an interview with Bloomberg News at the White House. A U.S. withdrawal from the WTO would severely undermine the post-World War II multilateral trading system that the U.S. helped build. Trump said last month that the U.S. is at a big disadvantage from being treated “very badly” by the WTO for many years and that the Geneva-based body needs to “change their ways.”
Trump to Move Fast on $200 Billion of China Tariffs
President Donald Trump wants to move ahead with a plan to impose tariffs on $200 billion in Chinese imports as soon as a public-comment period concludes next week, according to six people familiar with the matter. Companies and members of the public have until Sept. 6 to submit comments on the proposed duties, which cover everything from selfie sticks to semiconductors. The president plans to impose the tariffs once that deadline passes. On Thursday, China urged the Trump administration to back away from imposing the new tariffs. The U.S. should “take note of the calling from businesses and consumers in both countries, Ministry of Commerce spokesman Gao Feng said at a regular briefing in Beijing. Separately, Trump said Thursday his administration is examining how to determine whether countries are manipulating their currencies, a charge he’s repeatedly leveled against China.
Emerging Markets in Turmoil (Again)
Argentina’s currency crisis intensified on Thursday as the peso plunged 12 percent in a rout that only accelerated after the central bank tried to shore up confidence with an emergency increase in interest rates. The bank raised its benchmark measure to a global high of 60 percent, the latest attempt by policy makers to defend a currency that’s lost more than half its value this year. The lira extended this week’s slump as the Turkish central bank’s deputy governor was reportedly set to resign. South Africa’s rand volatility soared amid a controversial land reform debate, while expanded foreign-exchange intervention was needed in Brazil to bring some relief to the real. The market pain wasn’t contained to developing nations on Thursday, as the S&P 500 fell for the first time in five sessions.
PBOC Faces September Squeeze
September is set to be a hard month for China’s money markets, handing the nation’s central bank the tricky task of adding just enough liquidity without prompting renewed weakness in the yuan. Funding costs usually spike at this point, as banks hoard cash for quarter-end regulatory checks. Adding to the pressure now is a requirement to buy a flood of local government bond issuance, mandated to shore up infrastructure spending as the economy slows. A large amount of the People’s Bank of China’s existing funding is also maturing, and all told, liquidity needs could hit around 980 billion yuan ($143 billion) according to Bloomberg calculations. That leaves policy makers with a decision on how and when to meet those needs, without giving currency traders fresh reason to sell the yuan.
Bank of Korea Meeting on Deck
South Korea’s central bank is expected to keep its benchmark interest rate unchanged on Friday, as slowing job growth and global trade battles raise concerns about the outlook for the export-dependent economy. The Bank of Korea will likely keep the seven-day repurchase rate at 1.5 percent, where it has stood since the central bank raised it from a record-low in November. Seventeen of 18 economists surveyed by Bloomberg predicted no change. BOK Governor Lee Ju-yeol has cited financial imbalances and the need to create room for policy responses to an economic downturn as reasons for a possible rate hike. But the slowest job creation in more than eight years and the escalating trade fight between the U.S. and China have cooled speculation about that happening anytime soon.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- The biggest banks on Earth can’t stop talking about risk.
- Malaysian investigators have completed 60 percent of their 1MDB probe.
- Images of the next iPhone, Apple Watch have leaked.
- Jeff Bezos and Warren Buffett bet on a $250 billion unclaimed internet market.
- The U.S. government backed a lawsuit challenging Harvard’s admissions process.
- There’s a huge groundswell of small, independent watch brands.
©2018 Bloomberg L.P.