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China stock investors get set to turn the page on a year full of adversity, Mario Draghi warns of mounting risks to euro-area economy, and the Huawei affair keeps getting messier. Here are some of the things people in markets are talking about.
The Year of Adversity
A deluge of misfortunes has left China’s equity investors with their biggest losses in years, wherever you look. Stung by everything from a national vaccine scandal to a decline in consumer spending, the Trump administration’s crackdown on Chinese tech and Beijing’s tightening grip on education, gaming and drugs, the country’s stock market has lost $2.1 trillion in value in 2018. Languishing in a bear market, all 10 industry groups on the CSI 300 Index are on track to drop about 10 percent or more this year, one of the broadest sell-offs since the global financial crisis. There’s been nowhere to hide in a market already under pressure from slowing economic growth, record corporate defaults and China’s souring relationship with the U.S. on trade.
China’s economy is facing increasing downward pressure, and monetary policy will continue to be supportive, People’s Bank of China Governor Yi Gang said Thursday. The pressure comes as the nation shifts from high-speed growth to high-quality growth, according to Yi. “China won’t have double-digit growth like in the past years,” and it’s stayed around its potential growth rate in recent years, he said. Policy has been challenged by external shocks such as trade friction and other market turbulence, Yi said in a speech at Tsinghua University in Beijing, saying that the contraction in shadow banking has contributed to slower infrastructure investment. China's economic-policy summit will take place Dec. 19-21.
Mario Draghi said risks to the euro-area economy are worsening even as he called time on the European Central Bank’s flagship deflation-fighting tool. The ECB president told reporters in Frankfurt that while risks are still “broadly balanced,” they are now “moving to the downside” because of a range of concerns over geopolitics, trade protectionism and market volatility. The significant change in language pushed the euro lower and was reflected in updated economic projections that lowered the immediate outlook for inflation and growth. Draghi’s caution underscores a gamble the ECB is taking by capping its massive monetary support after almost four years of purchases that added 2.6 trillion euros ($3 trillion) to the institution’s balance sheet.
The Huawei affair seems to get messier by the day. China confirmed it’s questioning a second Canadian citizen, Michael Spavor, who was held in the city of Dandong near the North Korean border. For years, Spavor has escorted foreigners – including former NBA star Dennis Rodman – to meet North Korean leader Kim Jong Un and other officials. His detention follows the disappearance of former Canadian diplomat Michael Kovrig, who ran in the same circle of foreign experts on China’s ties with North Korea. Officials in Beijing said the two men are “suspected of engaging in activities endangering national security,” without saying if the cases are linked. Also, Huawei has frozen orders from a Japanese supplier.
Don't miss Bloomberg Businessweek's collection of stories on cryptocurrencies. Tracy Alloway outlines how the Bitcoin dream turned into a nightmare, while Matthew A. Winkler says investors lied to themselves to justify the mania's prices. It's definitely a messy political story, according to Bloomberg Opinion's Lionel Laurent. Separately, unabashed Bitcoin bull Tom Lee of Fundstrat said Bitcoin's fair value is around $14,000. It's currently trading around $3,300.
What we've been reading
This is what’s caught our eye over the last 24 hours.
- Asia stocks are headed for small losses on Friday.
- China's return to the U.S. soy market didn't boost prices.
- A billionaire vanished for 400 days and his empire boomed.
- Pimco says a U.S. recession signal is " flashing orange."
- BMW and Porsche beat Tesla to the 3-minute charge.
- The hedge fund market has been rocked by closures this year.
- A worrying signal about the Australian economy.
- It pops like caviar, tastes like lime, and is taking over menus.
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