Business Maverick

November 8: Five Things You Need to Know to Start Your Day

By Bloomberg 8 November 2019
Caption
An aerial view of the port and logistics hub in Lianyungang, Jiangsu Province, China, 20 May 2019, issued 29 June 2019. (PHOTO: EPA-EFE/ALEKSANDAR PLAVEVSKI)

Tariffs will be rolled back as the U.S. and China work towards a trade deal, Saudi Arabia is sussing out investments from its wealthy locals, and Australia’s biggest pension fund sees a window of opportunity through QE Down Under. Here are some of the things people in markets are talking about today.

Tariffs, Be Gone

In something of a breakthrough in the U.S.-China trade talks, the two countries have agreed to roll back tariffs on each other’s goods in phases as they work toward a deal, according to both sides. “In the past two weeks, top negotiators had serious, constructive discussions and agreed to remove the additional tariffs in phases as progress is made on the agreement,” China’s Ministry of Commerce spokesman Gao Feng said Thursday. White House economic adviser Larry Kudlow confirmed the advance in negotiations. “If there’s a phase one trade deal, there are going to be tariff agreements and concessions,” he told Bloomberg. The negotiations are ongoing and a time or place for the signing of any pact is yet to be determined.

Markets Move Up

Stocks in Asia looked set to gain and sovereign bond yields climbed with the yuan amid U.S.-China trade optimism. Futures climbed in Japan, Hong Kong and Australia. The S&P 500 Index rose to a fresh record Thursday, though closed off the highs as the two sides continue to negotiate over where and when a “Phase One” deal would be signed, but overall, risk appetite is picking up. Meanwhile, Treasury yields touched the highest since August. Elsewhere, West Texas crude rose, gold slumped, and the pound weakened after the Bank of England kept rates on hold — but two policy makers unexpectedly voted for an interest-rate cut.

Local Wealth

From the Olayan family and Prince Alwaleed Bin Talal, to low-profile tycoons in the oil producer’s backyard: Saudi Arabia is negotiating commitments from its wealthiest citizens to buy stock in the Aramco initial public offering, people with knowledge of the matter said. The billionaire Olayans, who own a major stake in Credit Suisse, are considering buying several hundred million U.S. dollars worth of Aramco shares, according to the people. Prince Alwaleed has also reportedly held talks to commit a significant amount to the IPO, and Aramco representatives have been seeking investment from others.

Hong Kong vs. Singapore vs. Shanghai

Hong Kong has long defied predictions it’ll lose its stature as Asia’s top international financial center — but for how much longer? Proponents of the city say its laws make it the perfect place for China to plug into global markets and note many financial players have deep roots there. Yet by several measures, the future isn’t so bright. Hong Kong now handles fewer stock trades than Shanghai. Its wealth management industry is struggling to keep assets as Singapore’s grows. Its taxes are low, but rents are sky high. Now pro-democracy protests are disrupting daily life, battering the local economy into a recession and angering decision makers in Beijing. A big bank looking to expand would probably see a number of reasons to pick Singapore or Shanghai instead. Here’s how the three cities stack up.

QE Bets

While observers in Australia mull over the likelihood of unconventional monetary policy being rolled out, the country’s largest pension fund is positioning itself for a leg higher in sovereign bonds as the Reserve Bank of Australia looks even closer to unleashing quantitative easing for the first time. One reason why AustralianSuper has an overweight stance on government bonds and an underweight one on the Aussie is thanks to the “view that we may well have QE start to get priced in Australia,” he said. Indeed, Carl Astorri, head of asset allocation and research at the pension giant, reckons the central bank may begin buying the country’s debt as soon as next year. He also thinks policy makers will probably lower their benchmark rate — now at 0.75% — as close to zero as they think they can get without damaging the banking system.

What We’ve Been Reading

This is what’s caught our eye over the past 24 hours.

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