Five Things You Need to Know to Start Your Day
Stocks tumbled as concerns about trade and global growth gripped investors. Here are some of the things people in markets are talking about.
Asian shares looked set to slide after U.S. equities dropped the most in almost three weeks, as rising pessimism that trade tensions with China will persist helped send technology and multinational companies tumbling. Treasuries climbed, oil fell and the yen strengthened. Caterpillar and DowDuPont led declines in the Dow Jones Industrial Average of more than 400 points at one point. The S&P 500 briefly pared losses after presidential adviser Lawrence Kudlow said a Financial Times report that the U.S. canceled a preliminary meeting with Chinese officials was untrue.
China Debt-Market Trickery
Chinese companies challenged by policy makers’ determination to tamp down leverage in the country’s financial system have found some creative ways to secure funding. One of the least transparent mechanisms to emerge so far is a tactic where bond issuers are indirectly buying their own bond offerings, according to investors and bond and credit-rating analysts. The idea is to inflate issuance sizes, creating the image of greater access to capital than might otherwise be true -- and leading to lower coupons in subsequent sales. Market players began picking up on the practice, known as structured issuance, when the deleveraging drive intensified a couple of years back. While loath to name names, some warn that the practice increased late in 2018 as default fears spread. For investors, it’s one more idiosyncrasy in the world’s third-largest bond market to consider when moving beyond government debt.
No Ask on Huawei Extradition
Canada hasn’t asked the U.S. to drop its extradition case against a top Huawei Technologies Co. executive and may meet with Chinese officials on the sidelines of the World Economic Forum, Justin Trudeau’s top diplomat said. Foreign Minister Chrystia Freeland, speaking to Bloomberg Television in Davos, Switzerland, said Meng Wanzhou will have full access to Canada’s legal system and that it would be “absolutely wrong” for the case to be politicized. Huawei’s chief financial officer was arrested in Vancouver on Dec. 1 after an extradition request by the U.S. in an Iran sanctions case. “The detention of Ms. Meng is a criminal justice matter exclusively. We would object very strongly to the notion that it is being politicized or used as political leverage in any way,” Freeland said Tuesday. “I want to remind people that she’s out on bail right now, she owns some beautiful homes in Vancouver, and is there. She has had and will continue to have full access to the Canadian judicial system, which is impartial and objective.”
Beijing Won’t Slash Treasury Stash
China isn’t likely to slash holdings of U.S. debt, and the country’s burgeoning savings pile means it will need to keep parking money in the world’s biggest government-bond market. That’s the message from Fang Xinghai, vice chairman of the China Securities Regulatory Commission, who said at a World Economic Forum panel in Davos, Switzerland that he doesn’t think his country “will in any way significantly reduce its investment into the U.S. government bond market. The comments come against a backdrop of trade tensions between the U.S. and China, with negotiators from both countries seeking to make progress on key issues following the implementation of a truce. China, which holds more than $1.1 trillion of Treasuries, is America’s largest foreign creditor.
Senate leaders have agreed to votes on rival proposals for reopening the government for the first time since the shutdown began last month, though it’s not clear either measure can pass. Lawmakers will hold separate votes on President Donald Trump’s plan that includes $5.7 billion for border wall funding as well as a Democratic proposal that would reopen agencies through Feb. 8. The agreement to proceed with votes marks the first attempt at finding a path out of the shutdown, but Trump has threatened to veto any measure that doesn’t fully fund his wall. Democrats likely have the votes to block Trump’s bill and the Democratic proposal would need to win support of 13 Republicans along with every Democrat.
What we’ve been reading
This is what caught our eye over the last 24 hours.
©2019 Bloomberg L.P.