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Business Maverick

November 27: Five Things You Need to Know to Start Your Day

U.S. President Donald Trump (Photo: Alex Edelman/Bloomberg/Getty Images)

Trump signals the first phase of a trade deal is near completion, early signs are pointing to a slowdown in China for a seventh straight month, and mainland investors are eagerly awaiting Alibaba stocks. Here are some of the things people in markets are talking about today.

Trump signals the first phase of a trade deal is near completion, early signs are pointing to a slowdown in China for a seventh straight month, and mainland investors are eagerly awaiting Alibaba stocks. Here are some of the things people in markets are talking about today.

‘Final Throes’

U.S. President Donald Trump declared Tuesday that talks with China on the first phase of a trade deal were near completion after negotiators from both sides spoke by phone, signaling progress on an accord in the works for nearly two years. “We’re in the final throes of a very important deal,” Trump told reporters at the White House. “It’s going very well.”  Negotiations have been complicated by strong support in the U.S. for pro-democracy demonstrators in Hong Kong and China’s suspicions that the U.S. is feeding unrest in the territory. Trump gave no indication about whether he would sign legislation Congress passed last week backing the protest movement in Hong Kong.

China Slowdown

Early indicators of China’s economic performance don’t look great. They point to a continued slowdown for a seventh straight month, after economic growth was already the slowest in almost three decades in the third quarter. Bloomberg Economics’ gauge aggregates the earliest data from financial markets and businesses. It shows a worsening picture for trade, sales manager sentiment, and factory prices. While tensions with the U.S. have eased since the two sides announced talks toward a so-called “phase one” deal last month, South Korean exports — a renowned indicator for trade flows in Asia — still contracted almost 10% in the first 20 days of November. That’s an improvement from September’s worst result in a decade, but it indicates that high-technology trade across the region is still struggling as the Christmas shopping season approaches. The faster fall in the prices of goods from Chinese factories in November also indicates that domestic demand is weak. If those deflationary effects continue, it will further hurt corporate profits at home.

Markets Mixed

Asian stocks were set for a mixed start Wednesday as investors kept tabs on news that could signal a breakthrough on U.S.-China trade, while treasuries rose. Futures in Japan saw modest gains and fell in Hong Kong and Australia. The S&P 500, Dow Jones Industrial Average and Nasdaq Composite all climbed to fresh records, as President Donald Trump declared that talks with China on the first phase of a trade deal were near completion. Benchmark treasury yields slipped, the dollar was little changed, and crude oil gained. Elsewhere, the pound lagged as polls showed the Conservative party’s lead narrowed ahead of the U.K. election. Brazil’s central bank intervened in the foreign exchange market for the first time in three months, selling greenbacks to prop up the real after it slumped to a record low. Bitcoin headed for the 10th day of declines, which would be its longest losing streak on record.

Must-Have Stock

Mainland investors can’t wait to finally own Alibaba shares. But as China’s most valuable technology company jumped in its first trading day in Hong Kong, most mainland investors could only watch the gains. Still, fund managers say the shares will be a must-have once they are included in the city’s trading links with the mainland, the timing of which remains uncertain. The industry is unfazed the company’s U.S.-listed equity has nearly tripled in price since September 2014’s initial public offering, predicting that Chinese investors’ familiarity with the e-commerce firm will push Alibaba’s market valuation higher still. The stock is eligible to join the Hang Seng Composite Index, of which many components can be traded through Chinese exchanges’ trading links with Hong Kong’s. But due to Alibaba’s unequal voting rights structure, its shares must trade for some seven months in Hong Kong and meet other requirements in areas like trading volume before being included into the stock connect.

Relying on Rivals

India’s Prime Minister Narendra Modi must invest trillions of dollars on roads and other critical infrastructure if he’s to pull the economy out of its slump, with at least half coming from provincial governments that are out of his control. India will need to spend 235 trillion rupees ($3.3 trillion) on infrastructure over the coming decade to return economic growth rates to more than 7.5%, according to Crisil Infrastructure Advisor. That means Indian states will have to more than triple their contributions from the current decade, it said. “Unless states contribute nearly 50% of infrastructure investments, India’s build-out momentum could taper sharply,” Sameer Bhatia, president of the S&P Group company, said in the report published Tuesday.

What We’ve Been Reading

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


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