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Markets shrug off rising U.S.-Iran tensions. Hong Kong landlords face tough times. How Nissan’s former boss became the world’s most famous fugitive. Here are some of the things people in markets are talking about today.
Rising tensions between the U.S. and Iran have prompted global calls for calm. As the U.S. ordered additional forces to the Middle East and President Donald Trump vowed the Islamic Republic will “never have a nuclear weapon” — without sharing details on how he plans to ensure that — UN Secretary-General Antonio Guterres urged all sides to exercise restraint, while EU leaders scrambled to come up with a response to the crisis as mourners packed the streets of Tehran. But just days after the shock U.S. killing of an Iranian general, calm has returned to global markets and investors are in wait-and-see mode, eyeing pressure points like rising oil prices and falling cyclical shares before changing their allocation strategies.“The question will be about how long this tension is sustained,” said Neil Dwane, a global strategist at Allianz, which oversees 557 billion euros ($623 billion).
Asian equities looked set to rebound after the S&P 500 erased an earlier decline to close higher on Monday. Futures gained in Tokyo, Sydney and Hong Kong. The U.S. stock benchmark rose for the third time in four sessions as heavyweight technology companies led a recovery. The risk-off rally also faded in the bond market, as 10-year Treasury yields advanced almost two basis points. The dollar fell against most of its G-10 counterparts, though the yen and Aussie were both lower. Oil pared gains after reaching the highest since April, to trade below $63 a barrel in New York.
In response to a surge in bond failures, Chinese regulators have taken unprecedented steps in recent weeks to restore investor confidence via more efficient and transparent handling of defaults. The moves, led by the nation’s first set of draft rules on tackling souring bonds, betray a sense of urgency among policy makers to tame wayward debtors who often get away with inadequate disclosure, constant repayment delays and protracted bankruptcy proceedings. But that’s easier said than done. Regulators’ latest pledges, while tougher, remain short on details such as how to enforce punishment, analysts say. Out of the 414 onshore bonds that had defaulted by the end of last year, only 74 completed “proper debt restructuring”, according to Tan Chang, an analyst at China Chengxin International Rating Co. It’s China’s bondholders who are often left bearing the cost of messy defaults.
In a city with some of the highest commercial rents in the world, landlords are staring down the barrel of a tough year. Anti-government protests in popular shopping districts and a slump in tourism have taken their toll on shop and office owners. According to the Hong Kong Retail Management Association, more than 5,600 jobs could be lost and thousands of stores may shut over the coming six months. That’s already impacted the value of retail-leasing transactions, which dropped 26% in the second half versus the same period of 2018, data from Centaline show. Knight Frank estimates rental costs for street shops in prime areas will decline by 15% or more in 2020 as a result of ongoing social unrest. But some see the nadir as an opportunity: Citigroup said in a Jan. 2 note that it’s now bullish on Hong Kong retail landlords.
In recent months, former Nissan leader Carlos Ghosn has faced humiliations including several arrests, more than 100 days in solitary confinement, seemingly endless interrogations, and, after his release on bail, intrusive 24-hour surveillance. He even had to seek court permission to call his wife, who prosecutors viewed as a potential co-conspirator in some of the financial crimes with which he’s been charged. Ghosn’s prospects of proving his innocence in Japan — where prosecutors win more than 99 percent of the cases they try — were dismal. Instead, with the help of a former U.S. Army Green Beret and a veteran of the 2003 Iraq invasion, Ghosn has been spirited out of Tokyo under the noses of Japanese police. Here’s how an audacious plan months in the making unfolded.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
- Here’s why so many emerging markets are blowing up right now.
- Asia’s best carry trade is suddenly in Hong Kong.
- John Bolton roils Trump’s impeachment trial...
- … and Morgan Stanley says a healthy economy won’t guarantee the U.S. president an election win.
- A $1 billion solar plant was obsolete before it ever went online.
- Lenovo shows off its new foldable, $2,499 laptop.
- Harvey Weinstein is charged in Los Angeles with sex crimes.
To contact the editor responsible for this story: Cormac Mullen at cmullen9@bloomberg.net
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