Five Things You Need to Know to Start Your Day
Five Things You Need to Know to Start Your Day
(Bloomberg) --
Good morning. The U.S.-China trade war is at full boil, stocks are sliding and tensions are mounting in Hong Kong. Here’s what’s moving markets.
Trump Tweetstorm
Never mind the weekend machinations at the G-7 meeting in Biarritz, France, over Iran or climate change. For traders, things are basically right where they left them as they went home on Friday: Donald Trump is ramping up the pressure on China, announcing higher tariffs and threatening to force U.S. companies to pull out of Asia’s largest economy. Stock prices and bond yields are falling anew as traders worry about a “no-limit” trade war, and investors are baffled as to how to deal with the Trump factor. One saving grace: Since the U.S. market already priced in the latest escalation late Friday, there’s a chance for a bounce late in the European day if traders in New York step in to buy the dip. At the open, though, expect broad declines, led by trade-sensitive sectors including autos and industrials.
Violent Clashes
The protests in Hong Kong took another ominous turn over the weekend, when violent clashes erupted between police and protesters Sunday evening. One officer fired a warning shot into the sky and six officers drew their guns during the scuffles. The demonstrations began in June as opposition to legislation that allows extraditions to China, but they’ve since morphed into a broader movement against Beijing’s grip on the city. The Hang Seng Index has fallen as much as 3.6% today, and the latest violence may weigh on European luxury-goods makers such as Kering and LVMH.
IPO Optimism
So the trade spat is heating up, a recession may be looming, stocks are slumping and… bankers are optimistic the IPO market is about to come to life again? It’s true, and not as crazy as it sounds. There was a flurry of weekend news of deals coming as soon as next month: Mobile-phone tower owner Helios Towers Plc is gearing up for a London initial public offering, while French bottle maker Verallia is eyeing a Paris listing, among others. Bankers are flagging next Monday as a day when some big announcements may land. Partly this is just a calendar effect: The market essentially closes in August, so it makes sense there would be some announcements in the pipeline. And the backdrop isn’t terrible, with benchmark indexes up 10% or more in Europe and the economy still growing. But this week will be key. If stocks don’t stabilize, companies could quietly slip those intention-to-float press releases into a desk drawer until conditions look better.
Ticking Clock
Time’s running out for Italy’s Democratic Party and the Five Star Movement to agree on who should be the nation’s next prime minister. President Sergio Mattarella has given the parties until Tuesday to form a government that would spare the country a new election, after the collapse of the previous coalition between Five Star and Matteo Salvini’s right-wing populist party the League. The Democrats’ leader Nicola Zingaretti will support Roberto Fico, one of Five Star’s earliest members, according to a Democrat official, while Five Star’s leader Luigi Di Maio wants to stick with Giuseppe Conte, who quit as premier last week. Failure to reach agreement could open the door to a new vote and a possible victory for the League, which has promised a renewed assault on the European Union’s budget rules. Signs of progress in the talks should boost Italian bonds and bank stocks.
Coming Up...
Get yourself an extra-large cup of coffee on your way to your desk this morning: The U.K market is shut for the late-August bank holiday, a day that typically is one of the three or four slowest of the year for European equity markets, usually surpassed in dullness only by days around Christmas. The earnings calendar is almost empty, with exactly one member of the Stoxx Europe 600 Index reporting: Swiss chemicals maker EMS-Chemie Holding AG. The company, a supplier to the auto and textile industries, said sales fell in the first half as the economy weakened “significantly.’’ Stock indexes in Asia were down 2% or more, while European and U.S. index futures pointed to a lower open. Keep an eye on the S&P 500 and whether it breaches 2,820 and 2,800.
What We’ve Been Reading
This is what’s caught our eye over the weekend.
- Everyone who hates the stock market is feeling a lot smarter now.
- Spanish beer isn’t flowing. Blame Brexit.
- Prince Andrew says he knew nothing of Jeffrey Epstein’s sexual predations.
- Boris Johnson's long journey from Trump hater to best friend.
- Barcelona police help nude beachgoers cover up with “robbery kits.”
- Transylvania is the new Tuscany.
- Why there are so many weird tech patents.
To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net
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