Five Things You Need to Know to Start Your Day

(Bloomberg) --

Hong Kong hangs over trade outlook, U.S. political drama and U.K. boredom, and Fed minutes are due. Here are some of the things people in markets are talking about today. 

Big trouble with little Hong Kong

There are plenty of ways to justify the recent risk-on rotation across global assets, but increasingly the outlook for trade isn’t one. Stocks are down today and bonds are up (more on that below) after the U.S. Senate unanimously passed a bill Tuesday aimed at supporting protesters in Hong Kong and warning China against a violent suppression of the demonstrations. In response, China has reiterated a threat to impose unspecified retaliation if the bill became law and urged America to stop meddling in Hong Kong affairs. It’s casting a long, long shadow over any hopes for a trade deal, which still looks to be some way off. Where we go from here is anyone’s guess, but a local election in the Asian city is a potential flashpoint.

Political drama (or not)

There’s a major political divide opening up between the U.S. and the U.K. On one side the high drama of the impeachment inquiry, on the other the utter tedium of Britain’s two leading politicians saying the same things at each other over and over. In Washington, all eyes today will be on U.S. Ambassador to the European Union Gordon Sondland who arrives after Tuesday’s marathon day of testimony, which featured four witnesses. All of them bolstered some of the key allegations being made by Democrats, though Republicans were able to elicit testimony disputing the idea that Trump acted illegally. Sondland is key because he was at the center of interactions with Ukraine at the same time the administration was holding up military aid. Meanwhile, in the first live TV debate between U.K. Prime Minister Boris Johnson and opposition leader Jeremy Corbyn, the early verdict was basically a draw, which was no surprise given the lack of substance throughout. Five Things is reminded of the tagline for that terrible Alien vs. Predator movie: “Whoever wins... we lose.”

Ready, steady, Feddy

If a trade deal isn’t going to sustain the recent rally, investors are going to have to find something or someone who will. Cue the Federal Reserve, which will publish minutes of its latest policy meeting at 2 p.m. Eastern Time. The only trouble is, all the evidence points to Jerome and his pals striking a more hawkish tone than markets would like. Elsewhere in central-bank land, Europe is still waiting for Christine Lagarde to offer some clues as to where she stands on monetary policy. Three weeks into the top job at the ECB, and months after her appointment was known, it’s still unclear if she even has an opinion. Five Things can’t work out if it’s genius or a bit worrying. And in Asia, the People’s Bank of China said it has set the one-year loan prime rate at 4.15% versus 4.2% last month, the latest in a series of micro easing moves as it struggles to balance growth and debt

Markets :-(

Overnight, the MSCI Asia Pacific Index fell 0.6% while the Japan’s Topix index closed 0.3% lower. In Europe, the Stoxx 600 Index was down 0.8% at 5:53 a.m. Eastern Time, with miners the loss leader and all industry groups in the red. S&P 500 futures pointed to a drop at the open, the 10-year Treasury yield was at 1.747% and gold was higher.

Coming up…

It’s a light day, with mortgage applications at 7 a.m. Crude inventory data is 10:30 a.m., and those Fed minutes at 2 p.m. After a day of impeachment hearings, policy wonks can tune into the Democratic presidential debate at 9 p.m.

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