Five Things You Need to Know to Start Your Day
Traders keep calm and carry on as volatility declines across asset classes. And the world’s biggest money manager says an escalating trade war shouldn’t scare investors away from China. Here are some of the things people in markets are talking about.
Volatility Takes a Back Seat
Asian stocks looked set for modest gains after bank earnings pushed U.S. equities higher Wednesday, but the real news may be the lack of price swings across developed-market assets recently. Front-month futures tied to the CBOE Volatility Index closed Tuesday at the lowest since before the record explosion in U.S. equity price swings back in February. Treasury-market implied volatility is moving back toward record lows, a testament to stable expectations about the near-term outlook for the Federal Reserve. Meanwhile, a Deutsche Bank index of estimated developed-world currency swings sits nearly one standard deviation below its 12-month average. “Markets appear rather complacent in the face of the trade tensions, so caution is warranted on directional trades at this point,” Kit Juckes, a Societe Generale strategist, wrote in a note.
Don’t Be Afraid to Invest in China, BlackRock Says
An escalating trade war between the U.S. and China shouldn’t scare long-term investors in the region, because economies tend to adjust to such tensions, according to BlackRock Inc. executives. “It’s that adjustment that’s painful,” Mark Wiseman, global head of active equities, said Wednesday at a press briefing in New York. “If you take a 10-year view on the Chinese economy, from an economic perspective it will smooth itself out.” Greater alternative investment opportunities may arise in real estate, private equity and private credit in China, Wiseman said.
Trade War Spills Into Uranium
The Trump administration opened an investigation into whether uranium imports threaten national security, a move that may lead to tariffs on the nuclear power plant fuel. U.S. uranium miners rallied on the news while utilities that operate reactors slipped. The Commerce Department said Wednesday it will probe “whether the present quantity and circumstances of uranium ore and product imports into the U.S. threaten to impair the national security.” The probe will cover the entire uranium sector, from the mining industry to enrichment, defense and industrial consumption, the department said.
Sydney Housing Slump Has Legs
Sydney’s property-market slump will last at least another two years as tougher lending standards and buyer nerves weigh on prices. That’s the consensus from a Bloomberg survey of 15 economists, over a third of whom have turned more pessimistic within the last three months. Prices Australia-wide have fallen for nine straight months as the housing boom goes into reverse. Sydney, where affordability is most stretched and investors had the biggest influence, is being hit hardest. Values in the harbor city are down 4.5 percent in the past year, compared to 0.8 percent nationally, and the city’s slump is poised to deepen. The median peak-to-trough price fall is estimated at 10 percent, compared to 5 percent for the country as a whole.
Coming Up ...
Asia's traders may be hoping Australian economic data out Thursday can strike a happier chord than the gloomy drumbeat that came from the region over the first three days of the week. Australia is expected to say its labor market maintained moderate jobs growth that kept the unemployment rate near the lowest levels since 2013. Less happily, economists estimate Japan will report that exports and imports slowed in June. We also get a rates decision from Indonesia, with the central bank expected to hold fire after hiking by a percentage point since mid-April.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- Singapore’s future is good, not great, economists estimate.
- Airbus and Boeing are keeping plane buyers secret for fear of igniting a tweet storm.
- Trump economic aide Larry Kudlow points the finger at China for stalling trade talks.
- Google gets a record $5 billion fine from the EU.
- Kim Jong Un is visiting factories in a push to fix North Korea’s economy.
- Elon Musk apologizes to a diver he described as a pedophile.
- Want to know how good a bar is? This is the drink to order.
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