Five Things You Need to Know to Start Your Day
Get up to date with what’s moving global markets this morning.
(Bloomberg) --
Iranian protests are becoming more violent, the Hong Kong dollar looks set for more volatility and Australian companies are grappling with damage from ferocious wildfires. Here are some of the things people in markets are talking about today.
Inside Iran, the admission by authorities that they accidentally shot down a Ukrainian passenger jet packed with Iranian students last week has shattered a brief moment of unity, putting its leadership on the back foot again after only recently quelling nationwide protests. The fact that Iran appears to have spent days giving false justifications for the crash, which killed all 176 people on board, added to the anger, sparking protests and a crackdown from the government. Iran’s admission came only after the U.S., U.K., Canada and Australia said they had intelligence indicating that the plane was struck by an Iranian missile, which Iran at first vehemently denied. Domestic backlash from the attempted cover-up is likely to constrain the regime’s freedom to act and erode whatever sympathy Iran had gained from the ramping up of pressure and tensions by the U.S. Crucially, the episode has also undermined confidence in the competence of the powerful Islamic Revolutionary Guard Corps, or IRGC, an elite force that’s both feared and revered inside Iran.
Things are only going to get wilder for Hong Kong dollar traders: the currency’s dramatic turnaround in recent months may be a sign of things to come. Hong Kong banks have far less idle cash on hand, after the amount of funds on loan soared to the highest since 2002 relative to deposits. Throw in a diminished pool of interbank liquidity and potentially high demand for the currency, and wild moves in local short-term rates are likely to occur more often. Volatility in the city’s interbank rates has been especially acute since mid-December, stoking a nearly 0.8% gain for the Hong Kong dollar in a month — a big move for a pegged currency. While analysts initially blamed the sudden strength on seasonal demand for cash and an unwind of short positions, the Hong Kong dollar has continued to gain in January. Tighter liquidity and wilder swings in the front-end borrowing costs will translate to the Hong Kong dollar moving “in a more volatile and less predictable pattern,” said Chun Him Cheung, a strategist at Morgan Stanley.
Asian stocks looked set to drop on Monday after U.S. shares declined following a lackluster employment report on Friday. Futures on South Korean and Australian shares retreated, and Japanese markets are closed for a holiday. The S&P 500 dropped from record levels on Friday after the latest jobs report delivered mixed signals on the strength of the economy. In the Philippines, the stock exchange suspended trade because the Taal volcano to the south of the capital is belching out ash. Looking ahead, the U.S. and China are still expected to sign the first phase of their trade deal, which President Donald Trump said will take place on Wednesday.
The wildfire crisis is starting to hurt Australian companies. The past few months have seen fires sweep across the world’s driest inhabited continent, destroying more than 2,000 homes and charring over 10 million hectares (25 million acres) of bush, with the two most populous states of New South Wales and Victoria the hardest hit. The California wildfires of 2018 destroyed about 1.7 million acres. Though a clearer picture of the extent of the economic impact won’t emerge for weeks or months, some businesses have detailed disruptions to supply chains, operations and earnings ahead of the February reporting season. Here’s a look at the companies that have been affected by the wildfires so far.
A landslide election victory for Taiwan’s President Tsai Ing-wen looks set to reinforce a winning run for the country’s financial markets. That’s the view of market watchers and analysts, with the result seen helping extend what has been a positive period of investor sentiment toward Taiwan. It is expected to provide a short-term boost to stocks in sectors that will benefit from the continuation of supportive government policies after Tsai’s re-election. Traders have their first chance to react to the victory of Tsai’s Democratic Progressive Party — which advocates for Taiwan’s formal independence — when markets open on Monday. Likely beneficiaries include stocks related to biotechnology and wind energy, which gained ahead of Saturday’s election on expectations that government support will continue. Tourism stocks may slide on concerns the result will chill cross-strait ties.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
- Australian Prime Minister’s ratings tumble over his handling of the wildfires.
- The Philippines braces for hazardous volcano eruption.
- Trump has arrived at his China moment. But will China deliver on their side of the bargain?
- The Ghosn brand is broken. These spin doctors say how to fix it.
- Japanese women face a a future of poverty.
- How the oil market learned to live with a Middle East in flames.
- A Japanese billionaire is looking for the love of his life… to join him on a SpaceX trip to the moon.
To contact the editor responsible for this story: Alyssa McDonald at amcdonald61@bloomberg.net
©2020 Bloomberg L.P.