Five Things You Need to Know to Start Your Day
Turkey’s tumult continued, spilling over to other developing nations. And slowing credit growth in China is reinforcing concerns over the nation’s economy. Here are some of the things people in markets are talking about.
Turkey Sparks Manic Monday in EM
Turkey’s market carnage rippled across emerging markets, sending both stocks and currencies toward their lowest levels in a year. The lira led losses among global peers after the nation’s first steps to bolster the financial system were seen by some analysts as insufficient to protect markets in times of distress. As President Recep Tayyip Erdogan lashed out at the U.S., took higher rates off the table and said he wouldn’t accept an international bailout, traders pushed down Turkish assets in a selloff that spilled over to other developing economies. Emerging-market equities tumbled as much as 2.2 percent. The rand’s one-month implied volatility soared by the most since December 2015, while the yield on Argentina’s century bonds rose to 10 percent as the peso touched 30 per dollar.
China Angst Grows as Credit Growth Slows
China’s broadest measure of new credit slowed, underlining concerns about the economy that have prompted authorities to start doing more to support growth. Aggregate financing stood at 1.04 trillion yuan ($151 billion) in July, the People’s Bank of China said on Monday. That was slower than the 1.39 trillion yuan in June, using the central bank’s new calculation method for this data. PBOC officials have pulled back on the pace of tightening and encouraged banks to lend more to counter a slowing economy and what looks like a potentially prolonged trade war with the U.S. Still, the chances of across-the-board stimulus has so far been ruled out, with policy makers continuing to keep a wary eye on the country’s debt pile.
RBI Can’t Catch a Break
There’s not a moment of respite for India’s inflation-targeting central bank. Just when gains in consumer prices eased, a renewed onslaught on the rupee amid a Turkish lira-led rout on emerging-market currencies may require a response, and possibly more rate action. Government data on Monday showed retail inflation quickened 4.17 percent in July from a year earlier, slower than the 4.5 percent median estimate in a Bloomberg survey of economists. The same day the rupee hit a record low of 69.9337 against the dollar, keeping its position as Asia’s worst-performing currency this year intact. A weaker currency complicates the Reserve Bank of India’s job of keeping prices in check. The monetary policy committee increased interest rates twice since June to curb rising price pressures, while the RBI depleted $23 billion in foreign reserves to check currency volatility.
Tesla Buyout Latest
Elon Musk said interest from Saudi Arabia’s sovereign wealth fund gave him the confidence to drop the bombshell last week that he was considering taking Tesla Inc. private. The Saudi Kingdom’s Public Investment Fund approached Musk almost two years ago about taking Tesla off the market, he wrote in a blog post Monday. He confirmed the fund recently bought an almost 5 percent stake and is interested in helping take Tesla private, as Bloomberg News reported Sunday. Musk described a July 31 meeting in which a managing director for the Saudi fund expressed regret that such a transaction hadn’t moved forward. “I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving,” Musk wrote in the post. He said this is why he tweeted on Tuesday that he had “funding secured” to take Tesla private at $420 a share.
China's data dump will be a key focus Tuesday, if traders and investors can tear themselves away from contemplating how much lasting damage Turkey's crisis will end up doing. Retail sales and industrial production are both forecast to come in stronger for July than they did for June, while fixed assets are expected to hold at a record low. Australia reports business confidence, which has fallen for two straight months, and Japan will release its final report on June industrial output after initial figures showed a stunning 2.1% m/m drop.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- Argentina unexpectedly hiked its key rate to 45%.
- Bloomberg Opinion’s Liam Denning notes Elon Musk is giving the world’s biggest oil producer “dangerous” leverage over his electric-car company.
- This Morgan Stanley banker went from intern to COO for Southeast Asia investment banking in just seven years.
- Here are seven things to remember about Turkey, per Mohamed El-Erian.
- The Winklevoss twins are doubling down on crypto even after SEC rejection.
- Two of the world’s best chefs are coming to the new Raffles Hotel in Singapore.
©2018 Bloomberg L.P.