Don't believe the doves: US trade disputes are likely to escalate after the midterms
- In the first eight months of this year, their U.S. business continued to flourish and the combined Chinese and European surpluses came in at two-thirds of the U.S. trade gap.
- At the moment, the strengthening household and business outlays in the U.S. are driving $670 billion of European and Chinese exports to the U.S. That export volume is an 11 percent increase from the first eight months of last year, and a great gift to celebrate a revival of U.S. economic activity.
- It's a gift because the combined European and Chinese surplus of $372.1 billion so far this year will go to their growing international creditor position, while the U.S. will have to keep issuing IOUs — that China and Europe don't want to buy anymore — to finance its $8.6 trillion of net foreign liabilities that the U.S. Department of Treasury reported at the end of the second quarter.
China stocks surge more than 4 percent, extending Friday's rally
- Asia Pacific markets rose on Monday as major Chinese indexes leaped more than 4 percent.
- The Shanghai composite added 4.17 percent in the morning session, likely on track for its best day since it gained 4.26 percent in March 2016, according to Chinese financial data provider Wind Information.
- In Japan, the Nikkei 225 erased earlier losses to trade up 0.36 percent while the Topix index gained 0.14 percent.
- The Australian dollar traded at $0.7112 in the afternoon session, weakening from an earlier high of $0.7126.
- Australian Prime Minister Scott Morrison will meet with independent lawmakers as early as Monday to try and shore up support for his government, according to Reuters.
- The U.S. dollar index, which tracks the greenback against a basket of its peers, traded at 95.663 in the afternoon, strengthening from levels below 95.500 in the previous week.
Abu Dhabi, Belgium Ports Partner over Blockchain Trade Pilot Project
- Abu Dhabi Ports has partnered with its Belgian counterpart to begin a blockchain-powered supply chain pilot project, the company revealed in a press release.
- Silsal, as the project is titled, uses an electronic blockchain ledger system to provide full cargo visibility and streamline trade flows and supply chains.
- If tested successfully, the Silsal project expects to automate the exchange, identification, and acknowledgment of cargo documents between Abu Dhabi ports and Belgium’s Port of Antwerp.
- Each stakeholder acts like a node of a blockchain network who gets to access and acknowledge the real-time supply chain of the shipped items.
- In the pilot, which will be conducted during the fourth quarter of this year, the Silsal project will run a Proof-of-Concept test in which it will handle international documents to the Port of Antwerp using blockchain technology.
ASX set to slip at open after a mixed session on Wall Street
- The US benchmark S&P; 500 stock index edged lower on Friday as strong earnings from Procter & Gamble were offset by ongoing concerns about rising interest rates and tensions over trade policy denting economic growth.
- On Friday, European stocks ended a choppy trading session broadly flat but managed to eke out a weekly gain despite mixed third-quarter earnings and while the budget row between Italy's populist government and the European Union heated up.
- Shares in tyre maker Michelin tumbled 11.2 per cent after it cut its sales outlook and downgraded its market growth forecasts, blaming slowing Chinese car demand and new emissions testing regulations.
- The benchmark index has given up around 7.8 per cent since its 27-year peak hit on October 2, as worries over Italy's budget, higher US interest rates and growth concerns in China weigh on market sentiment globally.
Investors are doubling down on a trade that blew up in their faces earlier this year — here's what Morgan Stanley says they should do instead
- After a market shock in early February caught traders off guard and forced them to cover positions, billions of dollars were erased from popular investment products.
- As this chart shows, they've rebuilt a net short volatility position to rival the one seen before the February meltdown.
- The most recent weekly period in the chart ended Thursday, the day the Cboe Volatility Index, or VIX, reached a multimonth high.
- Morgan Stanley is hardly a fan of the short-volatility trade.
- Strategists at the firm spoke out against it after last week's pan-market sell-off and accompanying volatility spike.
- These investors should instead be throwing in the towel on their beloved trade and going long volatility, Morgan Stanley says.
- It's likely that they used the recent VIX spike to replenish their short positions — an inverse buy-the-dip strategy of sorts.
UK firms 'near point of no return'
- Businesses are becoming exasperated at the lack of progress in Brexit talks and are pausing or cancelling investment in the UK.
- A week that many had hoped would bring progress in the talks has now come and gone without a breakthrough.
- The chief executive of one company on the call told the BBC the PM had "done a good job and had a reassuring tone" while another said there had been "nothing new in her message".
- Supermarket executives told the BBC they were weighing up the viability of flying in fresh food from outside the EU to avoid potential log jams at the ports like Dover.
- Industry body the SMMT described the lack of progress in talks as hugely disappointing and said it had "grave concerns".
- He also told a gathering of business leaders this week that great opportunities in international trade await the UK outside the EU.
Global investors haven't been this bearish on the economy since the financial crisis — and Bank of America says there's only one way to play it
- As global markets try to recover from the sharp drop in stocks this month, Bank of America Merrill Lynch is urging investors not to immediately go on buying sprees.
- The bank's monthly fund-manager survey for October was conducted October 5-11, in the thick of the sell-off.
- Investors saw a trade war as the global economy's biggest tail risk for a fifth straight month, amid the dispute that has seen the US slap tariffs on $250 billion worth of Chinese goods.
- In fact, the fear of higher interest rates and how they could crimp company borrowing was largely cited as a major trigger for the sell-off that has sent the S&P; 500 down 5% this month.
- Hartnett's note further showed that going long or betting on the S&P; 500 or the big US and Chinese tech stocks (FAANG + BAT) and betting against US Treasurys were considered the most crowded trades.
US and China find harmony on the ice as professional hockey makes inroads in world's most populous nation
- On September 19, as the game clock ticked down to zero in a face-off between the National Hockey League's (NHL) Boston Bruins and Calgary Flames, thousands of raucous fans cheered and waved towels, decked out in black, gold, red and white that formed a sea of clashing team colors.
- Instead, the game was actually played at the Cadillac Arena in Beijing, as part of American professional hockey's collaboration to promote ties between the world's most sports-crazy country and its most populous nation.
- Besides giving Chinese hockey fans the ability to watch more games, the NHL is working to provide young athletes in China with the training they need to play the sport.
- Daly said that the league, in conjunction with the Chinese government, sponsors ball hockey programs in Beijing schools, coordinates learn-to-play events and coaching clinics, and educates aspiring referees on how to call the game.
Cold war between China and US should chill local investors
- A good portion of his chat with Douglass focused on the state of trade tensions with China, and Morell explained America's growing anger with the rising superpower runs much deeper than Donald Trump.
- Morell expects the Democrats to win Congress in the mid-term elections later this year, but that could create more mayhem on China, not less, as Trump becomes more erratic and potentially more aggressive on tariffs.
- The question for investors, of course, is how these trade tensions will affect a market that Douglass describes as expensive and hard to read.
- As Douglass points out, China's Made In China 2025 plan calls for it to dominate an incredibly broad range of industries over the next seven years – beyond even the reign of Trump, should he win a second term.
The $600 billion reason why China's stock market crash might get a whole lot worse
- The fall, which has seen the benchmark Shanghai Composite index drop to its lowest level in almost four years this week, is generally explained through the prism of investors realising that the blockbuster growth China has enjoyed over the last decade is on the wane, and that things are likely to slow down to a strong, but not stellar, rate.
- In China, hundreds of companies use their shares as collateral for loans, but when share prices fall they are forced to sell in order to maintain a certain level of balance in brokerage accounts, used to lend the companies money.
- According to Bloomberg, about 4.18 trillion yuan ($603 billion,) worth of shares have been put up by company founders and other major investors as collateral for loans, accounting for about 11% of the country's stock market capitalization, based on calculations using China Securities Depository and Clearing Corporation data.