Five Things You Need to Know to Start Your Day
Beijing signals further steps to help China’s ailing economy are coming, while U.S. stocks rallied for a second day to take some of the sting off a brutal October. Here are some of the things people in markets are talking about.
More China Stimulus Ahead
China’s leadership signaled that further stimulus measures are being planned, as disappointing economic data showed that the current piecemeal approach isn’t working. The nation’s economic situation is changing, downward pressure is increasing, and the government needs to take timely steps to counter this, according to a statement from a Politburo meeting Wednesday chaired by President Xi Jinping. The signal of increasing urgency came just hours after purchasing manager reports showed an across-the-board deterioration that risks spilling into a broader drag on global growth. The world’s second largest economy is being damaged by its trade war with the U.S. and a domestic debt cleanup.
Stocks Rally Again
U.S. stocks rallied for a second day to close out one of the worst months of the bull market on an upbeat note. The dollar added to a 16-month high and Treasury yields jumped. The S&P 500 Index capped its biggest two-day surge since February, paring its biggest monthly decline since 2011 to 7 percent. The Nasdaq 100 Index jumped 2.3 percent, but still fell the most in any month during the bull market. Megacap tech shares that bore the brunt of October’s rout paced the Wednesday rebound, with Netflix and EBay surging more than 5 percent. The FANG cohort rallied after Facebook’s earnings topped expectations. Evercore ISI sees conditions ripe for U.S. stock valuations to rise, while Societe Generale cut its equity allocation, saying the S&P 500 might fall below 2,500.
The Bank of Japan tweaked its monthly bond-buying plan for a third time in a row as it seeks to boost activity in the world’s second-largest debt market. The central bank reduced the number of days on which it would buy bonds in the one-to-five year maturities by one, while increasing the amount that it could possibly purchase at each operation, according to its statement Wednesday. It also spaced out bond purchases and government debt auctions for all tenors except the five-to-10 year zone. Analysts said the idea is to curb the so-called BOJ trade, under which investors buy bonds at auction only to sell them to the central bank at a premium at its purchase operation soon after.
India’s Central-Bank Spat
India is the latest country to see age-old tensions between governments and central banks flare up as the era of easy money draws to a close. Prime Minister Narendra Modi’s government sent the central bank letters that cited a never-used power to overrule the Reserve Bank of India in a bid to push through measures that would unleash spending ahead of an election, Bloomberg reported Wednesday. That triggered a feisty speech from a central bank deputy in defense of independence, which brought the spat into the open. As the rift looked set to deepen Wednesday, the government appeared to ease tensions, issuing a statement saying it “respects and nurtures” central bank autonomy. That helped the rupee claw back some of its losses while the benchmark stock index surged 1.6 percent on speculation the situation may improve now.
Thursday brings November to replace October and with it markets may look for some relief. Or the selling could resume now that month-end rebalancing is over! There'll be plenty of data to catch traders' eyes also. South Korean inflation and trade reports are due up, along with PMIs for most of Asia, including the Caixin China figures. Plus, inflation reports for Thailand and Indonesia are on deck. And Australian Prime Minister Scott Morrison speaks at an Asia Society-Bloomberg conference in Sydney.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- Here's where to do business in 2019. And where to avoid.
- China's 100,000 developers are bracing for a giant shakeout.
- Jamal Khashoggi was strangled upon entering the Saudi consulate, Turkey says.
- Most existing Bitcoins didn’t change addresses in the last six months.
- Seven charts showing October's market craziness.
- Here's where luxury home prices are growing fastest.
- A political health check on the world's leaders.
©2018 Bloomberg L.P.