Tariff Threat

In true game-theory style, President Donald Trump said the U.S. will increase tariffs on China if the first step of a broader agreement isn’t reached. “If we don’t make a deal, we’re going to substantially raise those tariffs,” he said Tuesday in a speech to the Economic Club of New York. “And that’s going to be true for other countries that mistreat us too.” Nevertheless, he noted that the world’s two largest economies were “close” on the phase one deal. Trump and Chinese President Xi Jinping had planned to sign “phase one” of the deal this month in Chile, but the official ratification hit a roadblock when the event was canceled due to social unrest in Santiago. A new site for the signing hasn’t yet been announced. Still, U.S. stocks have rallied to records in recent days partly on optimism that tensions are cooling.

Markets Mixed

Asian stocks looked set for a mixed session Wednesday as investors continued to weigh the likelihood of a partial U.S.-China trade deal. The dollar and Treasuries advanced. Futures pointed lower in Hong Kong and Japan, and rose in Australia. U.S. stocks fluctuated before ending modestly higher as remarks by President Donald Trump didn’t add much insight into negotiations between the world’s two-largest economies. The 10-year Treasury yield slipped as the market returned from Monday’s holiday. Meanwhile, the dollar rose for the sixth time in seven sessions. Elsewhere, crude edged lower, gold edged higher and nickel headed for its longest run of losses in almost a year.

Disruptions Ahead

Hong Kong protesters called for disruption to the city’s busy commuter trains Wednesday, as clashes continued late into Tuesday evening. Police said “rioters threw bricks, petrol bombs, launched arrows and even fired a signal flare” at officers during clashes at a university. The chaos follows a flare-up in violence after Hong Kong last week saw its first fatality linked to the protests that began in June against a bill that would’ve allowed extraditions to mainland China. While the proposal has since been withdrawn, demonstrators have widened their demands to include an independent inquiry into police violence and the ability to nominate and elect their own leaders — both of which Beijing has rejected. Hong Kong Chief Executive Carrie Lam said Tuesday night that the protesters wouldn’t achieve their goals through violence.

Bonds, Bonds, Bonds

With some of the cheapest funding costs of the year on offer, it’s no wonder the floodgates have opened in the corporate bond market. Credit risk premiums have been tightening as investors pour money into corporate bond funds. That’s encouraging companies to borrow, with AbbVie looking to price the year’s largest sale Tuesday, and at least 10 new deals in the junk-bond market. It all adds to a bullish outlook as recession fears have abated amid stronger economic data and progress in U.S.-China trade talks, Bank of America strategists said in a report Friday. Investors expect spreads to tighten further in the next three months, but could widen over the longer-term, the strategists said. With that in mind, issuers are looking to get in now while the getting’s good.

On Hold

One of the world’s fastest-growing markets for exchange-traded funds has hit a speed bump as Australia’s regulator tries to tackle concerns around transparency and conflicts of interest. The Australian Securities & Investments Commission in July asked exchanges to stop admitting managed funds that don’t disclose their portfolios daily and have internal market makers. With the review not scheduled to be completed until the end of the year, funds are either sitting on the sidelines awaiting clarity or retooling their offerings. Assets in Australian ETFs and related products surged 41% to almost A$60 billion ($41 billion) in the 12 months to October, according to data from the ASX. Though a fraction of the $4 trillion market in the U.S., they are projected to grow rapidly.

What We’ve Been Reading

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

• Huawei says it makes cities safer. That looks like it’s mostly hype.
• The U.S. has banned any new flights to or from Malaysia, thanks to safety concerns.
• A new billion-dollar family emerges from Thailand power industry.
• The U.S. is said to raise the prospect of blocking the passage of WTO budget.
• The Supreme Court justices seem inclined to let Trump cancel DACA.
• For 25 days in stocks it’s been: Wait a day and it’ll be over.
• Is blockchain dead?