Five Things You Need to Know to Start Your Day
Five Things You Need to Know to Start Your Day
(Bloomberg) --
China asks for respect and blames the U.S. for trade war, investors are on alert as tensions rise, and the world’s most resilient economy has got the wobbles. Here's what's moving markets.
China Demands Respect
China’s government says it’s willing to work with the U.S. to end an escalating trade war, but blames President Donald Trump’s administration for the collapse in talks and won’t be pressured into concessions. Beijing released a white paper on Sunday saying the escalating trade war have done serious harm to the U.S. economy by increasing production costs, causing prices hikes, damaging growth and people’s livelihoods and creating barriers to U.S. exports to China. The comments come as both sides escalate their dispute before Presidents Xi Jinping and Trump may meet this month at the Group of 20 summit in Japan.
Markets Open
Asian stocks were poised to start the week on the back foot after the feud between the world’s two-largest economies grew over the weekend. The yen held near a six-month high. U.S. futures retreated and contracts signaled modest declines for equities in Japan and Australia. The S&P 500 Index sank 1.4% on Friday and the yield on 10-year Treasuries slumped to 2.13% after a new front from the Trump administration started with Mexico. On traders’ radar this week, a raft of central bank meetings: the European Central Bank sets monetary policy and new forecasts, the Reserve Bank of Australia is widely expected to cut interest rates, and India’s central bank also has a rate decision. U.S. jobs report is out Friday. Federal Reserve officials gather in Chicago.
U.S. Targets India
President Donald Trump opened another potential front in his trade war on Friday, terminating India’s designation as a developing nation and thereby eliminating an exception that allowed the country to export nearly 2,000 products to the U.S. duty-free. The action, which the administration has foreshadowed for months, ends India’s preferential treatment under the Generalized System of Preferences, a decades-old program designed to promote economic development around the world. India said that it had offered resolutions to the U.S. during bilateral trade discussions, and it’s “unfortunate” that those weren’t accepted.
Cracks Down Under
Australia hasn’t recorded two straight quarters of economic contraction since the first half of 1991, meaning it’s just a month away from overtaking the Dutch record and posting 28 years of continuous expansion. With home prices sinking, households swimming in record debt and the escalating U.S.-China trade war eroding confidence, bond and foreign exchange traders are betting that streak is now in jeopardy. Traders are betting RBA Governor Philip Lowe will cut rates at least twice to underpin employment and return inflation to target, with the first move expected Tuesday.
German Coalition Woes
The leader of German Chancellor Angela Merkel’s junior coalition partner stepped down in a surprise move that puts into question the survival of the government itself. Andrea Nahles, head of the Social Democratic Party, said she will resign as chief and parliamentary caucus leader after losing the rank and file’s backing. The party suffered a devastating defeat in the European Parliament elections last week. Her departure could prompt her party’s exit, forcing Merkel to lead a minority government, form an alliance with the Liberals and the Greens, or face a snap election.
What We’ve Been Reading
This is what’s caught our eye over the weekend:
- Morgan Stanley sees recession within a year.
- How tariffs will ricochet around the globe.
- Unknowns have traders scratching their heads on China stocks.
- World airline association cuts 2019 forecast.
- U.S. key reports a check for grim bond markets.
- Boeing faces doubtful airline chiefs.
- Where to invest $1 million right now.
To contact the editor responsible for this story: Cormac Mullen at cmullen9@bloomberg.net
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