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Oil plunges. The IMF warns of investor complacency amid escalating trade tensions. And Trump’s summit with Putin draws swift rebukes. Here are some of the things that people in markets are talking about.
IMF Sounds the Alarm
Escalating trade tensions are threatening to derail a global upswing , the International Monetary Fund warned. The pickup is already losing momentum amid weaker-than-expected growth in Europe and Japan as financial markets seem complacent about the mounting risks, the IMF said. It kept its global forecast unchanged Monday in the latest update to its Global Economic Outlook. The world economy will grow 3.9 percent this year and next, the Washington-based group said. The pace this year would be the fastest since 2011. But cracks are forming in the growth picture. Growth appears to have peaked in some major economies, and the boost from U.S. tax cuts and spending increases is expected to fade.
Oil Tumbles ... Again
After touching a 40-month high just two weeks ago, oil has fallen by about 10 percent as global trade anxiety combined with a Saudi offer of added crude to boost market volatility. Futures in New York fell as much as 4.8 percent on Monday following last Wednesday’s 5 percent tumble, results that together ramped up a measure of volatility to its highest in about a year. The latest decline comes as Saudi Arabia offers more crude cargoes to Asian customers, according to people familiar with the matter. In the U.S., President Donald Trump was said to be considering tapping the nation’s emergency oil supply to tame rising fuel prices.
Trump’s Russia Remarks Fuel Backlash
The U.S. president called Special Counsel Robert Mueller’s probe of Russian election meddling a “disaster” on Monday, again questioned whether Russia interfered in the 2016 vote he won and suggested he trusted U.S. intelligence officials and Vladimir Putin equally — all as he stood beside the Russian leader. In a remarkable news conference following a summit between Trump and Putin in Helsinki, both leaders challenged the U.S. intelligence community’s conclusions. The comments provoked a rare on-the-record rebuttal from Trump’s own intelligence director. A number of lawmakers from his own party harshly criticized the news conference, with Senator John McCain saying it represented “one of the most disgraceful performances by an American president in memory.”
EM in the Crosshairs?
JPMorgan Chase & Co. has joined the chorus of Wall Street banks warning emerging-market investors not to underestimate growing global protectionism. Trade wars are morphing from a tail risk to the base case, Luis Oganes and Jonny Goulden, strategists at the New York lender, said in a note. “The U.S.-China conflict has disturbingly shifted to the more worrisome scenario,” they said. “Collateral damage to EM from a U.S.-China trade war could be significant.” Morgan Stanley and Goldman Sachs Group Inc. are similarly bearish. Yet many investors think the threat is overblown. JPMorgan’s own asset management arm said Monday that many markets were now oversold and valuations “ very reasonable.”
Temasek Weighs U.S. Expansion
Temasek Holdings Pte., whose S$308 billion portfolio ($226 billion) includes stakes in companies such as Alibaba Group Holding Ltd., is still betting on the U.S., even as it grows more circumspect in deploying capital amid trade tensions and an increased likelihood of a global economic slowdown. “We need to be more exposed given the nature of the U.S. market,” said John Vaske, the Singaporean state investor’s joint head of North America, referring to economic conditions in the past few years. “Of all the fresh capital we freed up in the last two or three years, the U.S. has gotten a disproportionate share of it.” Temasek has poured billions globally into everything from startups to asset managers in the past five fiscal years.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- Singapore's lead over Malaysia's economy is shrinking.
- Jeff Bezos becomes the richest man in modern history.
- Bonuses soar for Australia’s CEOs. Not for its workers.
- The CFA exam is adding crypto and blockchain topics.
- Amazon crashes on Prime Day.
- Thailand wants to have its (hash) cake and eat it, too.
©2018 Bloomberg L.P.