Five Things You Need to Know to Start Your Day
U.S. stocks plunge the most in eight months and the so-called fear gauge hit the highest level since April amid fresh concern about the impact of the trade war with China. Here are some of the things people in markets are talking about.
U.S. stocks tumbled the most since February as a risk-off tone gripped financial markets, roiling technology and industrial shares. Treasuries rose with the yen amid demand for haven assets. The broad selloff took the S&P 500 to the lowest in three months, the Dow Jones Industrial Average plunged as much as 836 points and the Nasdaq 100 Index tumbled more than 4 percent for its worst day in seven years. All 30 members of the blue-chip index retreated, with Boeing and Caterpillar dropping at least 3.8 percent. Computer companies led the S&P 500 to a fifth straight loss, the longest slide since Donald Trump’s election win.
Luxury Crackdown Confirmed
Luxury investors’ worries over a crackdown at Chinese borders on undeclared imports were confirmed Wednesday when LVMH said the country is stepping up checks on returning travelers, deepening a selloff across the sector. Shares of the owner of Louis Vuitton, Christian Dior and Dom Perignon Champagne tumbled 7.1 percent in Paris. Selling spread to rivals like Gucci owner Kering SA and Cartier parent Richemont. U.S. jeweler Tiffany & Co. dropped 10 percent in New York. “The Chinese authorities have some laws that are being enforced with some more strength at times, which is what we’re seeing now,” Chief Financial Officer Jean-Jacques Guiony said on a call with analysts Wednesday. China’s luxury shoppers are becoming more selective as the trade war rattles the world’s second-largest economy.
Too Big to Fail, China-Style
In most countries, only a handful of financial institutions are large enough to warrant a “too big to fail” label. China isn’t most countries. It's planning to increase the number of companies it deems systemically important financial institutions, people familiar with the matter said, a sign that policy makers are stepping up crisis-prevention efforts as the nation’s debt burden swells to unprecedented levels. Regulators led by China’s central bank will initially shortlist at least 50 of the country’s largest lenders, insurers and brokerages as possible SIFIs. Firms that receive the designation will be subject to extra capital requirements, and may face additional rules on leverage, risk exposure and information disclosure. China has also turned half a trillion dollars of money from its central bank into bricks and mortar, and there's more to come.
Indonesia’s Fuel Flip-Flop
Indonesian President Joko Widodo on Wednesday ordered his energy ministry to scrap an increase in retail gasoline prices within hours of its announcement. Jokowi, who’s seeking re-election in a vote scheduled for early next year, asked PT Pertamina not to go ahead with a planned 6.9 percent increase in retail prices of premium RON-88, a widely used gasoline. With crude surging to a four-year high, Widodo, who earlier this year ordered a freeze in fuel and electricity prices until the end of 2019, is battling a ballooning energy subsidy bill and widening current account deficit. Raising fuel prices would have made him vulnerable to attacks from the opposition, which has blamed his economic policies for the slump in the rupiah to its lowest level since the 1997-98 Asian financial crisis.
Asia equity traders coming in after a couple days of calm will confront a decidedly less placid environment Thursday, with little in the way of local data to distract from the rout stateside. South Korea reports its current account, while we're still waiting for China FDI and lending data. And RBA Assistant Governor Luci Ellis speaks at a 2018 economic and social outlook conference.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- Blythe Masters says blockchain tech is coming to commodities.
- Dumping small stocks around recessions might be a big mistake.
- Things go wrong when stocks and bonds fall together.
- Travelers spend more in Thailand than anywhere else in Asia.
- The U.S. FBI director deflects queries on China tampering with server chips.
- Hurricane Michael is the strongest storm to hit the U.S. mainland since 2004.
- This snowboard uses a forked design.
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