Five Things You Need to Know to Start Your Day
A man rides a bicycle along the Bund while buildings of Pudong’s Lujiazui financial district stand across the Huangpu River as the sun rises in Shanghai. (Photographer: Qilai Shen/Bloomberg)

Five Things You Need to Know to Start Your Day

(Bloomberg) --

Trump warns tariffs will rise if China doesn’t sign a trade deal, markets are looking tepid, and investors are pouring their money into bond corporate credit. Here are some of the things people in markets are talking about today.

In true game-theory style, President Donald Trump said the U.S. will increase tariffs on China if the first step of a broader agreement isn’t reached. “If we don’t make a deal, we’re going to substantially raise those tariffs,” he said Tuesday in a speech to the Economic Club of New York. “And that’s going to be true for other countries that mistreat us too.” Nevertheless, he noted that the world’s two largest economies were “close” on the phase one deal. Trump and Chinese President Xi Jinping had planned to sign “phase one” of the deal this month in Chile, but the official ratification hit a roadblock when the event was cancelled due to social unrest in Santiago. A new site for the signing hasn’t yet been announced. Still, U.S. stocks have rallied to records in recent days partly on optimism that tensions are cooling. 

Asian stocks looked set for a mixed session Wednesday as investors continued to weigh the likelihood of a partial U.S.-China trade deal. The dollar and Treasuries advanced. Futures pointed lower in Hong Kong and Japan, and rose in Australia. U.S. stocks fluctuated before ending modestly higher as remarks by President Donald Trump didn’t add much insight into negotiations between the world’s two-largest economies. The 10-year Treasury yield slipped as the market returned from Monday’s holiday. Meanwhile, the dollar rose for the sixth time in seven sessions. Elsewhere, crude edged lower, gold edged higher and nickel headed for its longest run of losses in almost a year.

Hong Kong protesters called for disruption to the city’s busy commuter trains Wednesday, as clashes continued late into Tuesday evening. Police said “rioters threw bricks, petrol bombs, launched arrows and even fired a signal flare” at officers during clashes at a university. The chaos follows a flare-up in violence after Hong Kong last week saw its first fatality linked to the protests that began in June against a bill that would’ve allowed extraditions to mainland China. While the proposal has since been withdrawn, demonstrators have widened their demands to include an independent inquiry into police violence and the ability to nominate and elect their own leaders — both of which Beijing has rejected. Hong Kong Chief Executive Carrie Lam said Tuesday night that the protesters wouldn’t achieve their goals through violence.

With some of the cheapest funding costs of the year on offer, it’s no wonder the floodgates have opened in the corporate bond market. Credit risk premiums have been tightening as investors pour money into corporate bond funds. That’s encouraging companies to borrow, with AbbVie looking to price the year’s largest sale Tuesday, and at least 10 new deals in the junk-bond market. It all adds to a bullish outlook as recession fears have abated amid stronger economic data and progress in U.S.-China trade talks, Bank of America strategists said in a report Friday. Investors expect spreads to tighten further in the next three months, but could widen over the longer-term, the strategists said. With that in mind, issuers are looking to get in now while the getting’s good. 

One of the world’s fastest-growing markets for exchange-traded funds has hit a speed bump as Australia’s regulator tries to tackle concerns around transparency and conflicts of interest. The Australian Securities & Investments Commission in July asked exchanges to stop admitting managed funds that don’t disclose their portfolios daily and have internal market makers. With the review not scheduled to be completed until the end of the year, funds are either sitting on the sidelines awaiting clarity or retooling their offerings. Assets in Australian ETFs and related products surged 41% to almost A$60 billion ($41 billion) in the 12 months to October, according to data from the ASX. Though a fraction of the $4 trillion market in the U.S., they are projected to grow rapidly.

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