Five Things You Need to Know to Start Your Day
Get ready for a crowded week of monetary decisions, China has a pre-condition for U.S. trade talks, and Trump threatens a shutdown. Here are some of the things people in markets are talking about today.
Today has something of the calm before the storm about it as investors brace for monetary event risk. The Bank of Japan is expected to hold rates unchanged on Tuesday, but there is increasing speculation that it may change its policy on equity purchases as holdings of blue-chip companies are becoming large enough to cause distortions. The Federal Reserve is also likely to leave rates unmoved when it announces its decision on Wednesday, with economists saying that recent comments from President Donald Trump will have no impact on policy. On Thursday, the Bank of England is expected to raise rates for the first time since November, despite continued Brexit uncertainty. Central banks in Brazil and India also hold policy decisions this week.
Chinese Foreign Minister Wang Yi said his country would be willing to resume trade negotiations with the U.S. if the Trump administration took a less combative approach to talks. The standoff between the world’s two largest economies isn’t expected to dampen Chinese issuance of dollar debt, which hit a record in 2017, spurred by sales from companies, banks and the government. Underwriters project the market will continue to boom in the coming years. For now, veteran investor Mark Mobius still sees risks in China, saying the bottom for Chinese equities is still some way off.
President Trump said on Twitter yesterday that he would be willing to ‘shut down’ the government if Democrats do not support funding plans for his wall along the border with Mexico. The tweet came after a meeting last week in the White House between Trump, House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell to discuss how to avoid an Oct. 1 shutdown, a month before elections that will determine control of Congress.
Overnight, the MSCI Asia-Pacific Index was down 0.3 percent while Japan’s Topix index closed 0.4 percent lower amid growing concerns over earnings expectations. In Europe, the Stoxx 600 Index had slipped 0.3 percent by 5:45 a.m. Eastern Time as a mix of disappointing earnings and falling metal prices dragged equity prices down. S&P 500 futures pointed to a lower open, the 10-year Treasury yield was at 2.982 percent and gold was down.
The biggest disappointments of the earnings season have come from the tech sector, with Facebook Inc. and Twitter Inc. both seeing precipitous falls post-results. The next tech behemoth to report is Apple Inc. tomorrow as it continues to flirt with a $1 trillion valuation. Investors are looking for 15 percent year-over-year revenue growth, and any insights into its upcoming iPhone range.
What we've been reading
This is what's caught our eye over the weekend.
- Odd Lots: Even the world’s greatest investors have made terrible mistakes.
- Charles Koch says Trump tariffs could trigger U.S. recession.
- Behind the spectacular collapse of a private equity titan.
- Dealers see auction increases at U.S. August 1 refunding announcement…
- ...As Wells Fargo says the Treasury 1-to-10 year spread is the one to watch.
- One manager sees early warning signs for the red hot leveraged loan market.
- Artificial intelligence has learned to probe the minds of other computers.
©2018 Bloomberg L.P.