G-20 getting even more important, China makes policy moves, and for some reason 10 people want to be the U.K. Prime Minister. Here are some of the things people in markets are talking about today.
If the G-20 confab wasn’t already marked on investor calendars with a big red circle, it should be now after President Donald Trump threatened to raise tariffs on China again if President Xi Jinping doesn’t meet with him at the upcoming summit in Japan. The latest tough talk may have something to do with the fact that China and its head honcho have yet to confirm a sit-down. Meanwhile, tension has opened up on another front after the U.S. expressed “grave concern” over Hong Kong legislation that would for the first time allow extraditions to mainland China. Everything will be fine, Five Things is telling itself over and over.
China policy moves
Whether it’s a move to reassure the market or a small peace offering to the U.S., China’s central bank set its yuan fixing stronger than expected on Tuesday. The strong bias in the daily fix — which restricts the onshore yuan’s moves by 2% on either side — is the largest since Bloomberg started releasing the survey estimates in August 2017, according to our smarter Asia colleagues. The central bank also said it plans to sell bills in Hong Kong later this month, a move that will drain liquidity and support the currency. It’s “a clear message that the authorities are still intent on keeping the yuan stable,” according to ANZ’s Khoon Goh. Some can only dream of having that kind of control. Meanwhile, the central bank is also extending a gold-buying spree amid the trade war, and the Ministry of Finance said it’ll ease restrictions on how local governments can spend money raised by special bonds (effectively a form of stimulus). For anyone trying to second guess China’s next moves, you could do worse than follow this guy.
Given the way things have been going in the U.K. of late, in particular the slow car crash that Brexit has become, there’s probably a plausible argument to be made that the Brits would do better with no one at the helm. As it happens, that’s the current status quo after Theresa May formally stepped down as Tory party leader at the end of last week. The party contest to replace her got underway for reals on Monday, with 10 candidates confirmed as in the running. Like a really rubbish Hunger Games, they’ll be whittled down in the coming days, and around the week of July 22 the new PM will take their turn failing to find an easy path forward on exiting the European Union. Plus ça change, thinks Five Things, after a quick Google translate.
The risk-on rally continues. The MSCI Asia Pacific Index gained 0.7% as Japan’s Topix finished 0.5% higher. The Stoxx Europe 600 Index was up 0.9% as of 6:03 a.m. Eastern Time. The S&P 500 was poised to climb at the open, the 10-year Treasury yield was higher at 2.171%, and gold slipped again to $1,322.34.
Not much on the docket again today data-wise, although we will get a hint at small business optimism at 7:00 a.m., then producer prices at 8:30 a.m. In a desperate bid to fill out this section, Five Things will also point out that the USDA releases the WASDE report at 12:00 p.m., there’s an auction of three-year U.S. bonds and erm… well… Uber CEO Dara Khosrowshahi is speaking at the Economic Club in Washington. That’ll do.