U.S. turns up the pressure on China, Erdogan wins Turkish election, and OPEC deal leaves a lot of uncertainty. Here are some of the things people in markets are talking about today.
In the latest blow to trade relations, the Treasury Department will heighten scrutiny of Chinese investments in sensitive U.S. industries, according to eight people familiar with the plans. The administration may use national security rules to create a two-track system for the Committee on Foreign Investments in the U.S., or CFIUS, which would slow capital in key sectors from Chinese buyers. With deadlines on tariffs and other trade barriers coming in the next few weeks, negotiations have descended into something of a game of ‘chicken’. China, along with the European Union, is steadfast in saying it will oppose U.S. trade measures, warning unilateral actions will push the world into recession.
With more than 90 percent of votes counted, Recep Tayyip Erdogan has won 53 percent in Turkey’s presidential election, meaning he can avoid a second-round run off poll to continue as the country’s longest-serving ruler of the modern era. The main opposition party candidate Muharrem Ince conceded while disputing the vote count. While initial market reaction to the result was positive, with the main Istanbul stock index rising almost 4 percent at the open, that gauge turned negative as the morning progressed, while the lira gave up all its post-result bounce.
Hedge funds and oil investors, who were playing a waiting game on crude prices in the run-up to the weekend’s meeting of OPEC and its allies in Vienna, seem to have been left confused by the outcome. Even though few are clear on how big the production increase will be, most have decided supply is set to grow. That’s put Brent crude prices under pressure and, if nothing else, changed the mood music. Perhaps it can best be interpreted as OPEC’s attempt at forward guidance. The spread between Brent and West Texas Intermediate has narrowed to less than $6 a barrel this morning.
Overnight, the MSCI Asia Pacific Index fell 0.8 percent while Japan’s Topix index closed 1 percent lower as trade concerns and worries about auto-tariffs weighed on markets. In Europe, the Stoxx 600 Index was 1 percent lower at 5:50 a.m. Eastern Time with trade again being the major drag on stocks following a report from Germany’s Ifo institute. S&P 500 futures pointed to a loss at the open, the 10-year Treasury yield was at 2.882 percent and gold was lower.
British Prime Minister Theresa May and German Chancellor Angela Merkel both face renewed pressure coming into this week’s European leaders summit. The chorus of U.K. businesses calling for more clarity on the process from May grew louder over the weekend, when Britain’s major business lobby groups used the second anniversary of the Brexit referendum to tell the prime minister they’re “deeply concerned” that time is running out for her to secure a deal that protects jobs and investment. For Merkel, hopes for an easy European solution to a migration problem jeopardizing her coalition were dashed over the weekend when an informal summit failed to reach agreement.
What we've been reading
This is what's caught our eye over the weekend.
- Odd Lots: The creator of VaR explains how large banks measure the risk of their own portfolios.
- Brexit’s big short: How pollsters helped hedge funds beat the crash.
- Polls of Senate races boost GOP prospects for retaining control.
- Why Deutsche Bank can’t just shake off its problems.
- Every step China’s taking to contain losses in financial markets.
- Bitcoin hovers near $6,000 after 2018 low hit in a lousy quarter.
- There’s a good chance we really are all alone in the universe.
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