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Get up to date on what’s moving the markets this morning.
(Bloomberg) --
Chinese policy makers aren’t rushing to pump stimulus, tear gas and violent clashes as Hong Kong sees 10th weekend of protests, and the havoc a strong dollar can wreak. Here’s what’s moving markets.
Holding Back
Chinese policy makers are holding back from rolling out the big guns of monetary stimulus, keeping options in reserve as the trade standoff with the U.S. risks morphing into a global currency war. The People’s Bank of China late Friday called for a “rational” view on current headwinds, signaling that the targeted approach to shoring up output would continue. The U.S.’s labeling of China as a currency manipulator “signifies the trade war is evolving into a financial war and a currency war,” and policy makers must prepare for long-term conflicts, Chen Yuan, former deputy governor of the PBOC, said at a China Finance 40 meeting in Yichun, Heilongjiang. Former PBOC Governor Zhou Xiaochuan called for efforts to improve the yuan’s global role to deal with the challenges of a dollar-denominated financial system.
Market Open
Stocks in Asia looked set to kick off the week on a cautious note after U.S. equities retreated Friday amid trade-war concerns. Futures pointed to a lower start in Hong Kong and Australia, though trading may be limited in much of the Asia-Pacific region with markets shut on Monday in Japan, Singapore, India, Malaysia, Philippines and Thailand. The yen edged higher, extending moves seen at the end of last week as President Donald Trump said that planned trade talks with China could be called off. On the data docket this week, the U.S. consumer price index, out Tuesday, probably picked up to a 1.7% annual pace in July, according to economist estimates. Wednesday brings data on China retail sales, industrial production and the jobless rate, expected to confirm an ongoing slowdown in the world’s second-largest economy. Thursday sees the release of U.S. jobless claims, industrial production and retail sales data. Australia jobs figures are due Thursday.
More Tear Gas
Hong Kong demonstrators clashed with police across the city with officers again resorting to tear gas to try to disperse protesters hurling projectiles and petrol bombs in the 10th weekend of anti-China protests in the city. The protests, sparked in June by a bill easing extraditions to the mainland, have evolved into the biggest challenge to Chinese control since the U.K. relinquished its former colony in 1997. The social unrest is having an increasing impact on the economy and daily life in one of the world’s most densely crowded cities, raising concern that Beijing will use force to restore order.
Getting Tougher
Chinese President Xi Jinping’s plan to turn China into one of the world’s most advanced economies by 2050 is getting harder by the day. Mounting pressure from his U.S. counterpart Donald Trump adds to a slew of structural challenges facing China’s $14 trillion economy — including record debt levels, rampant pollution, and an aging population — the risk is that the country gets stuck in a “middle-income trap,’’ stagnating before it reaches rich-world levels of development.
Wrecking Ball
Worries are emerging that the dollar’s steep ascent could trigger a recession. One long-term gauge of the greenback’s performance that stretches back to the late 1960s is having its best decade on record, emerging from the wreckage of the financial crisis with a 25% surge since the end of 2009. Another index from Bloomberg bottomed out a few weeks before the U.S. lost its AAA rating from S&P in 2011, only to jump 32% since then as the dollar trounced every other Group-of-10 currency along the way. The surge tends to erode the profits of U.S. multinationals that help power the world’s largest economy, and also raises costs for foreign corporations that have trillions of dollar-denominated debt. Hans Redeker, Morgan Stanley’s London-based global head of FX strategy says where the dollar is now could push the global economy into a more difficult situation and raise the risks of a recession.
What We’ve Been Reading
This is what’s caught our eye over the weekend.
- The world’s wealthiest family gets $4 million richer every hour
- Singapore sees “no profit” from Hong Kong instability
- Italia’s government is in crisis.
- Tension as Indian Kashmir is in lock down
- Central bank’s cry for budget help
- What comes after the death of Jeffrey Epstein?
- Bhutan: the world’s newest wine frontier
To contact the editor responsible for this story: Adam Haigh at ahaigh1@bloomberg.net
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