Pedestrians walk past the New York Stock Exchange (NYSE) in New York, U.S. (Photographer: John Taggart/Bloomberg)

Five Things You Need to Know to Start Your Day

(Bloomberg) --

Investors breath a sigh of relief on the hope of renewed trade talks between the U.S. and China. Turkey takes traders on a roller-coaster ride. And global credit is in a rare state of upheaval. Here are some of the things people in markets are talking about.

Trump Pushes China for Better Deal

President Donald Trump prodded China to offer more at the bargaining table as the two countries prepared for their first major negotiation in more than two months in an effort to head off an all-out trade war. “We’re talking to China, they very much want to talk,” Trump said Thursday at a cabinet meeting at the White House. “They just are not able to give us an agreement that is acceptable, so we’re not going to do any deal until we get one that’s fair to our country." Earlier, Trump’s top economic adviser welcomed China’s announcement that it will send Vice Commerce Minister Wang Shouwen to the U.S. for talks in late August with David Malpass, undersecretary for international affairs at the Treasury Department.

Trade Optimism Boosts Stocks

U.S. stocks rose, buoyed by optimism over the planned trade talks as well as a soaring retail sector. Food retailers posted their biggest gain since November after Walmart said grocery sales spurred strong earnings results. Commodities recovered from Wednesday’s slump, with oil edging higher and copper rebounding. The possibility of a breakthrough in the trade standoff between China and the U.S. is helping to shake off some of the elevated caution that’s infected global markets, particularly in developing nations, over the past week as Turkey has plunged into a currency crisis. The dollar fell with Treasuries.

Turkey Won’t Impose Capital Controls...

Turkish President Recep Tayyip Erdogan moved to shore up alliances in Europe and the Middle East, easing pressure on the battered lira, as the standoff between Ankara and Washington deepened. Turkey won’t impose capital controls, Finance and Treasury Minister Berat Albayrak told 6,000 investors in a global conference call held to bolster confidence in the Middle East’s largest economy. Restricting capital flows isn’t an option in a free-market system, he said. The minister, Erdogan’s son-in-law, said he’s focused on fixing key weaknesses in Turkey’s $880 billion economy, including reining in inflation and narrowing the current-account deficit.

...But Further Sanctions Loom

Turkey’s attempt to assuage investors were undercut somewhat by Treasury Secretary Steven Mnuchin’s announcement that the U.S. is ready to slap Turkey with more sanctions if Erdogan refuses the quick release of an American pastor. The lira pared gains after the remarks. "The real issues are the economic policies," said Shamaila Khan, director of emerging-market debt at AllianceBernstein in New York. "The reaction to the sanctions from the U.S. would have been very different if the government was following orthodox policies." Mohamed El-Erian, chief economic adviser to Allianz SE, said it’s time to start reducing Turkey exposure, while BlackRock forecast a “rocky road ahead” for emerging markets.

Credit Market Upheaval

Global credit markets are in a rare state of upheaval. Emerging-market sovereign dollar-denominated debt is trading at a wider premium than speculative-grade U.S. companies –  a break from historic norms – underscoring economic and political stresses around the world, even as America Inc. powers ahead. The asset class typically trades at a lower spread than American high-yield bonds, helped by higher credit ratings on average. Trade angst, dollar strength and contagion from Turkey have taken the shine off developing-economy assets, including those denominated in dollars. Meanwhile, robust earnings growth and a tax package that encourages deleveraging among indebted firms have combined to bolster American balance sheets.

What we’ve been reading

This is what caught our eye over the last 24 hours.

©2018 Bloomberg L.P.