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Italy, China and interest-rate angst spark a steep selloff in stocks, Goldman follows the U.S. Treasury secretary in pulling out of the Saudi Davos, and the EU turns to Asia to counter Trump’s global influence. Here are some of the things people in markets are talking about.
Stocks Sell Off, Again
A risk-off tone gripped global financial markets, with U.S. stocks sliding while Treasury prices climbed with the yen on demand for havens. American equities fell the most since last week’s rout as investors worried about the U.S.-China trade war’s impact on economic growth, the Italian debt crisis and rising interest rates. High-flying technology shares again led the selloff, while defensive sectors like utilities and real estate fared better. Mixed earnings, with disappointments from key industrial and tech names, added to investor anxiety. The S&P 500 slid almost 1.5 percent, while the dollar touched its highest level in more than a week and the 10-year Treasury yield fell to 3.17 percent. Italy’s yield spread over Germany’s safer debt hit its highest point since 2013 as European Union officials questioned the country’s budget plan.
U.S. Treasury Pulls Out of Saudi Forum
U.S. Treasury Secretary Steven Mnuchin withdrew from an investment conference in Riyadh as the Trump administration tacked a bit on Saudi Arabia, under increasing pressure to hold its leaders accountable for the disappearance of journalist and critic Jamal Khashoggi. Mnuchin announced his change of plans after meeting at the White House with President Donald Trump and Secretary of State Mike Pompeo, who was dispatched on Monday to Saudi Arabia and Turkey, where Khashoggi was last seen. Pompeo’s trip came amid reports that the U.S.-based journalist was tortured, killed and dismembered in the Saudis’ own consulate in Istanbul. After flirting with a “rogue killer” theory of Khashoggi’s disappearance — and observing Riyadh’s importance as a customer of U.S. arms makers — Trump on Thursday said it “certainly looks” like Khashoggi is dead and warned of “very severe” consequences for the killing. Goldman Sachs pulled its top executives from the conference hours after Mnuchin backed out.
Beijing’s Final Warning
While the U.S. Treasury stopped short of labeling China a currency manipulator in its latest semiannual report, the department’s sharpened language didn’t escape the foreign-exchange market’s notice. In a break from recent releases, Treasury devoted a section Wednesday to outlining concerns over China’s bilateral trade surplus and said the U.S. was “deeply disappointed” that the Asian nation doesn’t disclose its FX interventions. The department cautioned that it will be looking to see whether countries “resist depreciation pressure in the same manner as appreciation pressure.” The Chinese yuan slid Thursday in a move that some market participants expect to continue. Given the currency’s role in determining global risk sentiment, emerging-market currencies may be poised for more pain, an ING currency strategist said.
Chinese Shares Evoke Past Traumas
Three years after China’s equity bubble burst, the country’s investors are once again reeling from losses. More than $3 trillion has been wiped out since January — all of France’s stock market capitalization and then some — as Chinese shares tumbled the most in the world. Private companies are struggling with liquidity concerns, the economic outlook is slowing as a trade war with the U.S. deepens and a weakening yuan is starting to prompt capital outflows. History suggests it’s not over. While the Shanghai Composite Index is now down 30 percent from this year’s high, it was sliced almost in half as the 2015 boom turned to bust.
EU Looks to Asia to Counter Trump
The European Union expects to win Asian political support this week in campaigns aimed at countering Trump’s challenges to global trade rules, the fight against climate change and the international nuclear accord with Iran. In a draft statement for an Oct. 18-19 Asia-Europe summit in Brussels, the EU says the government leaders agreed on “the vital need of maintaining an open world economy and upholding the rules-based multilateral trading system, with the World Trade Organization at its core.” The draft seen on Thursday by Bloomberg News says the leaders “recognized the serious challenge posed by climate change, its tremendous impact felt worldwide and the need for urgent and effective action.”
What we’ve been reading
This is what caught our eye over the last 24 hours.
- $41 billion divides India’s richest brothers.
- Scott Morrison’s razor-thin majority is already at risk in Australia.
- A $65 million L.A. mansion just hit the market.
- What to watch in China’s GDP report.
- A 20-year low for one Southeast Asian currency.
- These are the best new ski hotels of the year.
- Apple is set to unveil iPad, MacBook overhauls.
©2018 Bloomberg L.P.