Watered-down sanctions for North Korea, loosened Chinese capital controls, and U.S. stocks at record highs. Here are some of the things people in markets are talking about.
The U.S. softened its proposed sanctions for North Korea, removing an oil embargo and freeze of Kim Jong Un's assets, in a bid to make the potential punishments more palatable to China and Russia. The U.N. Security Council voted to approve the package, which includes a cap on crude and refined product shipments to North Korea, on Monday evening in New York. Kim's regime warned that the U.S. will face "the greatest pain and suffering it had ever gone through in its entire history" if the sanctions came to pass. North Korean hackers are stepping up attacks on cryptocurrency exchanges in South Korea to secure a means of exchange that may aid in efforts to sidestep sanctions.
Chinese policy makers are making sure the yuan isn’t a one-way trip higher. Beijing lifted the reserve requirement rule on currency forwards, which had made it more expensive to short the yuan, a loosening of capital controls as outflow pressure abates. Both the onshore and offshore yuan retreated against the dollar on Monday in the wake of the announcement. Strategists had speculated that Chinese policy makers would allow market forces to hold greater sway over the currency's ebbs and flows after the yuan’s strong performance so far this year. Hedge funders who piled in to bet against China's currency, following the shock devaluation in August 2015, have largely thrown in the towel. Chinese export growth has slowed from an annual pace above 10 percent as of March to 5.5 percent as of August, which may have factored into policy makers' desire to prevent the yuan from growing too strong.
Risk assets performed well on Monday while safe havens came under pressure as the weekend’s worst-case scenarios for weather and geopolitics failed to materialize. The S&P 500 Index closed at a record high after North Korea didn't launch a missile and the estimated damages related to Hurricane Irma were slashed. The Bloomberg Dollar Spot Index snapped a seven-session losing streak and 10-year Treasury yields climbed. The Global X Lithium & Battery Tech ETF posted huge gains after China announced that it will set a deadline for automakers to end sales of fossil-fueled cars. Oil also advanced.
China Bashes Bitcoin (Again)
Bitcoin fell 1.3 percent on Monday, extending Friday's retreat, after China struck another blow against cryptocurrencies on the heels of last week's ban on initial coin offerings, or ICOs. The world's second-largest economy plans to ban the trading of digital currencies like bitcoin over exchanges, while continuing to allow over-the-counter transactions. Other regimes, including Vladimir Putin’s and Kim Jong Un's, have shown themselves more receptive to digital currencies.
Nikkei 225 and S&P/ASX 200 futures are soaring ahead of the open as the global risk rally looks set to carry on. Gains in the Asia Pacific region were widespread to open the week. The day’s biggest economic release – Indian inflation for August, forecast to quicken to an annual pace of 3.27 percent from 2.36 percent – will come after the end of the trading day in Asia.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- Thailand is now a magnet for fixed-income flows.
- The Korean crisis is crushing Hyundai.
- What to expect at Apple’s huge event.
- Australian banks are sitting on half a trillion in ‘liar loans,’ says UBS.
- Trump to meet Malaysian Prime Minister Najib Razak – his former golf partner.
- The kingmaker in New Zealand’s coming election.
- Janet Yellen and Ivanka Trump had breakfast.