Five Things You Need to Know to Start Your Day
Trump confident on China trade talks, many Asian markets will be shut this week to welcome the Year of the Pig, and Australian banks brace for the findings of a report into years of misconduct. Here are some of the things people in markets are talking about today.
Trade Talks Confidence
U.S. President Donald Trump sounded confident that agreements with both China and North Korea are on the horizon. Trade talks with Beijing are "doing very well," the president told CBS, adding that he thinks Pyongyang "wants to make a deal" on denuclearization. Trump and Xi Jinping may meet in Vie334359408tnam on Feb. 27-28, according to the South China Morning Post. The president reiterated an announcement on the date for his next summit with Kim Jong Un will be announced shortly. Trump also said in the interview that he intends to maintain a military presence in Iraq, in part to "watch" Iran.
Asian equity futures were slightly higher early on Monday. U.S. stocks eked out a gain Friday as a strong U.S. jobs report and progress on China trade talks vied with a disappointing sales forecast from Amazon. Treasuries fell, with 10-year yields up six basis points. The dollar ended last week on an upward note, with the yen and Aussie losing the most ground. Oil jumped while gold retreated. Looking ahead, it will be rather quiet in Asia with multiple countries in the region taking days off to celebrate the start of the Lunar New Year, which ushers in the Year of the Pig. China will be off all week, while there are also multi-day breaks in Hong Kong, Indonesia, South Korea, Malaysia, Singapore, Taiwan and Vietnam. The Reserve Bank of Australia and the Bank of England are among those reviewing monetary policy – Australia on Tuesday and the Bank of England on Thursday. Also watch out for Federal Reserve Chairman Jerome Powell speaking in Washington and Trump’s delayed State of the Union address.
Australia’s scandal-plagued banks are set for their biggest upheaval in decades as a wide-ranging inquiry into misconduct recommends how the nation’s financial industry should atone for wrongdoings. In its final report to be released on Monday, the government-appointed Royal Commission could propose financial firms be broken up to avoid conflicts of interest, push for changes to pay and bonuses, tighten lending standards, urge tougher action from regulators, and even push for charges against banks and senior executives. During 68 days of hearings, and in more than 10,000 public submissions, the inquiry exposed a laundry list of misconduct, from charging dead people for services, lying to regulators, and pushing people into poorly-performing products to meet bonus targets.
Wall Street’s Bid to Short Chinese Stocks
Wall Street firms are preparing to lobby China for changes that would make it easier to bet against its stock market through a trading link from Hong Kong, one of several changes the institutions want as Chinese equities become an ever-growing part of global portfolios. Societe Generale SA said it’s among the banks seeking a relaxation of rules that restrict lending of shares listed in China, a prerequisite for short selling. Citigroup Inc. and Morgan Stanley are also pushing for measures that include clearances for block trades and fewer closures of the stock connect with Hong Kong around public holidays, according to people familiar with the matter.
The Dollar’s Impact on Earnings
Gyrations in the currency markets may have a negative impact for many U.S. companies’ fourth-quarter results after exchange rates weren’t any friendlier to companies in the third quarter. The ICE Dollar Index jumped more than 10 percent from its low in February 2018 to its high in November, and its average level last quarter was 3 percent higher than the previous year’s period. While a strong dollar is good news for many import-reliant consumer companies because it results in greater buying power overseas, the currency’s strength underscores the challenges that many of America’s corporate giants faced amid global trade tensions, a tighter U.S. rate policy and concerns about China’s economy. Every 7 percent to 8 percent move in the dollar results in a 1 percent move in the opposite direction for U.S. corporate profits, according to Jonathan Golub, chief U.S. equity strategist at Credit Suisse Group.
What we've been reading
This is what's caught our eye over the last 24 hours.
- Asian stocks’ ``bear-market bounce.’’
- Brexit thwarts Nissan’s SUV plans.
- Dividend bonanza likely for Australian investors.
- Philippine president dispels rumors he’s dead.
- Crypto is over is takeaway from Paris fintech summit.
- Don’t count on a 2020 recession, JPMorgan says.
- Holiday shopping spree to be resilience test for Chinese consumers.
©2019 Bloomberg L.P.