Five Things You Need to Know to Start Your Day

(Bloomberg) --

Trump promises more trade talk, Hong Kong retailers struggle, and Ray Dalio gets caught on the wrong side of the rates trade. Here are some of the things people in markets are talking about today.

Trump Promises Talk

President Donald Trump said Thursday that the U.S. and China would talk trade following signs from Beijing that it wouldn’t immediately retaliate against the latest tariff increase — but by early afternoon in Washington, neither side had confirmed whether a conversation had taken place. The announcement comes as Trump is under increasing pressure from Republican senators who say that uncertainty on trade is contributing to a U.S. economic slowdown, with more Americans now laying the blame on the president for the deceleration. Trump’s reply to the criticism: “We’re winning.” Meanwhile, China is said to be prepping for the possibility of a no-deal scenario, thanks to Trump’s “flip-flop” diplomacy style.

Markets to Gain

Stocks in Asia were set to track a U.S. rally after China indicated it wouldn’t immediately retaliate against the latest American tariff increase, while Treasuries edged down and a dollar gauge hit a two-year high. Futures climbed in Japan, Hong Kong and Australia on the final trading day of a tumultuous month dominated by the trade war. The S&P 500 Index rose for a second day after a spokesman for China’s commerce ministry said that escalating the conflict won’t benefit either side. Investor sentiment remains fragile after President Donald Trump’s recent pronouncements on trade and as investors await a resolution. Elsewhere, West Texas crude held at about $56 a barrel, the pound slipped on Brexit risk, and Italian bonds rose as the country moved toward forming a new government.

Dalio Down

While many other funds are enjoying some recovery respite after years of struggle, Ray Dalio has been caught on the wrong side of the rates trade with his flagship Pure Alpha at Bridgewater Associates tumbling about 6% through Aug. 23. The losses were fueled by bearish wagers on global interest rates, according to a person familiar with the matter. It figures: Dalio, who runs the world’s largest hedge fund firm with $160 billion in assets, has been lamenting the rate environment for several months. The fund, which bets on macroeconomic trends, is trailing the 13% return for the MSCI World Index. Macro funds have gained 4.7% this year through July as rising volatility and roiling political tensions have created trading opportunities, but fund managers who have been betting that bond yields would rise have been burned. Other well-known managers to take a hit include Michael Hasenstab, who runs $115 billion in fund assets at Franklin Templeton, and Pimco Income Fund’s Dan Ivascyn.

Retail Pain

Whether it’s glitzy shops in Central or decades-old family businesses along the city’s winding streets, retailers of all levels across Hong Kong these days find themselves struggling in much the same way. Data for Hong Kong’s retail sales performance in July, the first full month affected by the protests, is due for release at 4:30 p.m. in Hong Kong on Friday. Economists surveyed by Bloomberg see a 12.5% contraction from a year earlier. The city’s economy contracted by 0.4% in the second quarter, more than originally estimated, exports fell for a ninth straight month in July and the jobless rate ticked higher for the first time in two years. No surprises, then, that sentiment among small businesses, especially retailers, has hit record lows.

Bad Timing 

Australia is on track to run its first current-account surplus since 1975, but it’s coming at precisely the wrong time. The dramatic turnaround is probably not what the Reserve Bank is after, because with a cash rate at a record-low 1% and forecast to drop to 0.5% next year, a current-account surplus suggests the currency might be a bit stronger than it otherwise would be and investment somewhat softer — the opposite of what’s needed in 2019. Meanwhile, the expected budget surplus means the government isn’t providing much stimulus to an economy that’s slowed sharply and where rate ammunition is running low.

What We’ve Been Reading

This is what’s caught our eye over the weekend.

• A Hong Kong protest organizer says he was attacked by masked men. 
• Trump’s new trade-war weapon might just be antique Chinese debt.
• Hurricane Dorian, on course to Florida, is now expected to become a Category 4 storm.
• That time a jetlagged Elon Musk made Jack Ma sound grounded.
• Inside the plan to build iPhones in India.
• Burgundy’s vineyards haven’t been this hot since the black death. 
• These are Asia’s most luxurious airport lounges.

To contact the editor responsible for this story: Alyssa McDonald at amcdonald61@bloomberg.net

©2019 Bloomberg L.P.