Tag Archive: China

FX Daily, June 26: Biggest Drop in the S&P 500 in June Weighs on Global Equities

The S&P 500 fell nearly one percent yesterday, its steepest fall this month and this was a weight on Asia Pacific and European activity. Most markets have eased, though not as much as the US did. Hong Kong, India, and Singapore were notable exceptions in Asia, where the MSCI benchmark slipped for a second day.

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FX Daily, June 25: Heightened Political Risks Weigh on Sentiment

Overview: It is far from clear that the US sanctions against nine Iranian officials, with the foreign minister to be added later brings negotiations any closer. At the same time, US officials trying to keep expectations low for the weekend meeting between Trump and Xi. The heightened political anxiety will have to make room for Fed Chairman Powell's talk in NY.

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FX Daily, June 24: Slow Start to Important Week

The Trump-Xi meeting at the G20 this coming weekend and heightened tensions in the Gulf, with the US set to impose new sanctions on Iran's crippled economy are keeping investors on edge. News the opposition won the re-do of the Istanbul mayoral election has lifted the Turkish lira.

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FX Daily, June 21: Markets Pause Ahead of the Weekend

The global capital markets are trading quietly ahead of the weekend. Equity markets are mostly narrowly mixed. Chinese shares extended their run, and the major benchmarks were up 4%+ on the week. Japan, Australia, South Korea, and India saw gains pared.

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FX Daily, June 19: Still Patient?

Overview:  Risk-taking was bolstered by the dramatic shift in Draghi's rhetoric less than two weeks after the ECB meeting and a Trump's tweet announcing that there was going to be an  "extended" meeting between him and Xi at the G20 meeting and that the respective staff would begin coordinating. It was later confirmed by the Chinese media.

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FX Weekly Preview: FOMC, EMU PMI, and Pre-G20 Positioning: Crossroads and Crosswinds

The week ahead is likely to provide some clarification for investors on three fronts that have been a source of uncertainty.  The FOMC meeting, with updated forecasts, is center stage.  The credit markets are pushing the Fed to be aggressive but can be disappointed.  In the eurozone, the preliminary PMI may confirm a modest, even if uneven recovery. 

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Dimmed Hopes In China Cars, Too

As noted earlier this week, the world’s two big hopes for the global economy in the second half are pinned on the US labor market continuing to exert its purported strength and Chinese authorities stimulating out of every possible (monetary) opening. Incoming data, however, continues to point to the fallacies embedded within each.

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Commodities And The Future Of China’s Stall

Commodity prices continued to fall last month. According to the World Bank’s Pink Sheet catalog, non-energy commodity prices accelerated to the downside. Falling 9.4% on average in May 2019 when compared to average prices in May 2018, it was the largest decline since the depths of Euro$ #3 in February 2016.

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FX Daily, June 12: Anxiety Ticks Up, Risks Pared

Overview: The S&P 500 snapped a five-day advance yesterday and set the heavier tone for equities today.  Continued protests in Hong Kong were not shrugged off as they have been in the last couple of sessions.  The Hang Seng's nearly 1.9% decline was the largest in a month and led the region lower. 

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Irredeemable Currency Is a Roach Motel, Report 9 June

In what has become a four-part series, we are looking at the monetary science of China’s potential strategy to nuke the Treasury bond market. In Part I, we gave a list of reasons why selling dollars would hurt China. In Part II we showed that interest rates, being that the dollar is irredeemable, are not subject to bond vigilantes.

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FX Daily, June 05: Dollar Remains on Back Foot

Overview: The Federal Reserve's patience never excluded a rate cut should conditions warrant. The acknowledgment of this without signaling a change its stance is being seized upon to justify aggressive pricing of rates. At the same time, there has some tempering of trade anxiety on the margin that is also constructive. Asia and European equities were pulled higher after the strongest rally in several months in the US. 

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Dollar Supply Creates Dollar Demand, Report 2 June

We have been discussing the impossibility of China nuking the Treasury bond market. We covered a list of challenges China would face. Then last week we showed that there cannot be such a thing as a bond vigilante in an irredeemable currency. Now we want to explore a different path to the same conclusion that China cannot nuke the Treasury bond market.

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The Crime of ‘33, Report 27 May

Last week, we wrote about the impossibility of China nuking the Treasury bond market. Really, this is not about China but mostly about the nature of the dollar and the structure of the monetary system. We showed that there are a whole host of problems with the idea of selling a trillion dollars of Treasurys: Yuan holders are selling yuan to buy dollars, PBOC can’t squander its dollar reserves If it doesn’t buy another currency, it merely tightens...

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FX Weekly Preview: The Evolution of Three Issues are Key in the Week Ahead

As May winds down, the light economic calendar will allow investors to take their cues from the evolution of three disruptive forces--trade, Brexit and the US economy. With actions against Huawei and possibly a handful of Chinese surveillance equipment producers, the US raised the stakes. The retaliatory tariffs are effective on June 1, but Beijing has not formally responded to the moves against Chinese companies.

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FX Daily, May 22: Sterling Can’t Get Out of Its Own Way

Overview:   There is a nervous calm in the capital markets.  Yesterday's rally in US shares failed to excite global investors.  China, Hong Kong, and Taiwan markets fell, while Japan was mixed. Foreign investors continued to sell Korean shares, but the Kospi rose.  European shares narrowly mixed, leaving the Dow Jones Stoxx 600 little changed.

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Rare Earths may Provide Leverage

Many American observers argue that the trade imbalance gives the US an advantage in a trade war with China. The US enjoys escalation dominance in tariffs because Chinese imports of US goods are so much less than the US imports of Chinese goods.  However, the focus on quantities may be misleading.

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FX Daily, May 21: Equities Find Some Traction while the Dollar Firms

Overview:  Equities are paring some of their recent losses.  The MSCI Asia Pacific Index is posting its first back-to-back gain in a month, led by a more than 1% rally in China.  Heightened prospects for an Australian rate cut in a few weeks helped extend the run in the local equity market to a new record high.  European bourses are higher, with the Dow Jones Stoxx 600 rising around 0.3% in the morning session.

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China’s Nuclear Option to Sell US Treasurys, Report 19 May

There is a drumbeat pounding on a monetary issue, which is now rising into a crescendo. The issue is: China might sell its holdings of Treasury bonds—well over $1 trillion—and crash the Treasury bond market. Since the interest rate is inverse to the bond price, a crash of the price would be a skyrocket of the rate. The US government would face spiraling costs of servicing its debt, and quickly collapse into bankruptcy.

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FX Weekly Preview: The Week Ahead featuring the Battle for 7.0

The strategic objective is to integrate China into the world economy. The liberal international solution was trade, investment flows, and cultural exchanges. The rise of nationalism and China's own willingness to flaunt the international rules are defeating the strategy.

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FX Weekly Preview: Trade, the Dollar, and the Week Ahead

China is isolated on trade. No one supports its trade practices. The idea that China was going to "naturally" evolve to be more like the US, or Europe for that matter, was always fanciful and naive. The emergence of China, as Napoleon warned two centuries ago, would make the world shake.

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