Five Things You Need to Know to Start Your Day
Trump and Xi will dine in Buenos Aires, Australia’s economy is looking increasingly Japanese, and is there a new sheriff in crypto? Here are some of the things people in markets are talking about.
A Dinner to Remember
President Donald Trump and China’s Xi Jinping will meet over dinner Saturday evening in Buenos Aires, marking a pivotal moment in the escalating trade war between the world’s two largest economies. Trump is hopeful for a breakthrough with Xi but is ready to impose more tariffs if the upcoming talks don’t yield progress, Larry Kudlow, Trump’s top economic adviser, told reporters Tuesday during a briefing ahead of the Group of 20 meeting in Argentina. The president believes “there is a good possibility that we can make a deal” and he “is open to it,” Kudlow said later Tuesday. Meanwhile, China’s economy slowed for a sixth straight month in November as the ongoing trade war with the U.S. continued to weigh on the outlook for economic growth.
Fed’s Clarida Backs a Gradual Approach
Federal Reserve Vice Chairman Richard Clarida said the central bank’s gradual approach to interest-rate hikes is appropriate as U.S. monetary policy gets closer to its optimal longer-run setting. “As the economy has moved to a neighborhood consistent with the Fed’s dual-mandate objectives, risks have become more symmetric and less skewed to the downside than when the current rate cycle began three years ago,’’ Clarida said at The Clearing House and Bank Policy Institute’s annual conference in New York on Tuesday. He omitted what may -- or may not -- be a critical word from his speech: some. At the tail end of his address, Clarida said he supported “gradual policy normalization.’’ Though, speaking in Washington on Oct. 25, the Fed’s No. 2 official not once but twice said that “some further gradual adjustment’’ in rates would likely be appropriate.
A Sheriff for Crypto?
Cryptocurrency players including DRW’s Cumberland trading juggernaut and Mike Novogratz’s Galaxy Digital merchant bank have banded together to draft a set of best practices, the latest attempt to clean up an industry frequently marred by scandal. Through the newly formed Association for Digital Asset Markets, the 10 founding members intend to develop “rules for the efficient trading, custody, clearing and settlement of digital assets,” according to a statement Tuesday. However, Goldman Sachs isn’t any closer to offering one of the key services sought by clients seeking to enter the digital currency arena. “One of the things they ask me is ‘Can you hold our coins?’ and I say ‘No, we cannot,” Justin Schmidt, the bank’s head of digital asset markets, said during a conference in New York.
Korea Risks Semiconductor Slowdown
South Korea has profited so much from the explosion in demand for semiconductors that its economy is now vulnerable to any downturn in the market for these tiny electronic components. They now account for more than 21 percent of exports and two-thirds of earnings at Korea’s biggest company, Samsung Electronics Co. The firm is the nation’s largest private employer and its revenue is equivalent to 15 percent of annual economic output. The stock market is similarly exposed. While the profits have kept pouring in for Samsung and its smaller rival SK Hynix Inc., their share prices are under pressure amid concern that chip prices may fall next year. Equally worrying, Chinese regulators have taken aim at the pair and their American peers for alleged anti-competitive behavior, just as policy makers in Beijing seek to boost local semiconductor manufacturers.
Australia’s Economy Looks Increasingly Japanese
Australia’s economy risks turning Japanese, with average growth over the past decade the slowest since 1984 and inflation at the weakest since the Beatles were together. “Once this becomes entrenched, it gets hard to break out of it -- as Japan has found,” said Shane Oliver, chief economist at AMP Capital Investors Ltd. in Sydney. “We’re not quite as bad as them because they’ve had deflation and zero rates, but there is a risk that the longer this goes on the harder it will be to get inflation back up to average.” While growth this year has accelerated and unemployment has fallen, the weaker longer-term performance of Australia’s economy helps explain why wages are stagnant and interest rates are stuck at a record low. Australians are accepting pay rises at around half the 4 percent rate achieved last decade as they prioritize job security, and are only spending at retailers that discount. That’s spurred the central bank to leave its cash rate at 1.5 percent for more than two years to try and tighten the labor market so companies have to offer higher pay.
What we’ve been reading
Here’s what caught our eye over the past 24 hours.
- What $50 oil means for the world economy.
- Malaysia’s economy is beating its emerging-market peers.
- Fortnite addiction is forcing kids into video-game rehab.
- Emerging markets face a brighter future after a rotten 2018.
- There’s more to Italian sparkling wine than Prosecco.
- The inside story of how Mario Draghi saved the euro.
- Where to invest $1 million right now.
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