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A bitcoin frenzy like no other

South Korea’s crypto-craze and bull market blues in China. Here are some of the things people in markets are talking about.

Korea’s Crypto-Craze

As bitcoin surges past $13,000, so many South Koreans have embraced cryptocurrencies that the nation’s prime minister recently warned they could corrupt the nation’s youth. The craze has spread so far that bitcoin is trading at a premium of about 16 percent over prevailing international rates in Korea, which has emerged as a sort of ground zero for the global crypto-mania. While neighboring Japan hosts more transactions by some measures, Korea punches far above its weight: in the 24-hour period through Wednesday evening in Seoul, about 21 percent of the world’s bitcoin trades on fee-charging venues involved the Korean won, according to Coinmarketcap.com. Worry is growing among the nation’s policy makers. The country’s top financial watchdog, which briefly roiled cryptocurrency markets with its ban on initial coin offerings in September, said this week that it has “grave concerns” about overheated speculation and has formed a task force with other government bodies to increase supervision.

Bull Market Blues

Something odd is happening in the world of Chinese equities. The Shanghai Composite Index has climbed 24 percent from its January 2016 low, yet a majority of stocks in the benchmark gauge have fallen during the period. That’s not how it usually happens. In fact, this is a first for Shanghai bull markets since at least 2002, when Bloomberg began keeping track of the data. Moreover, all 45 other national equity gauges that have climbed at least 20 percent since last January have seen a majority of their members climb. The short explanation is that some of the biggest companies are outperforming by an unusually large degree. Intervention may also be playing a role. Equity purchases by government-linked funds helped fuel the Chinese market’s recovery from a $5 trillion crash in late 2015, and the so-called National Team is thought to have been stabilizing share prices ever since.

Let’s Talk

We’ll talk, on one condition. That’s the message to North Korea coming from the U.S., which would be ready to open a dialogue with the hermit kingdom if the nation renounced further nuclear weapon and missile tests, and then followed through on the pledge, according to U.S. Ambassador to China Terry Branstad.  Speaking on the sidelines of the Fortune Global Forum in Guangzhou, Branstad also said that sanctions against North Korea were “starting to have an impact.” He went on to call Kim Jong Un’s push for nuclear weapons “the biggest threat to humankind right now.” Trump has been ramping up sanctions on North Korea, and pressuring other nations such as China to help.

U.S. Stocks Put Brakes on Global Selloff

U.S. stocks ended the session little changed, putting the brakes on a global selloff, with software developers gaining and energy firms tumbling along with oil prices. The Stoxx Europe 600 Index nearly erased losses of as much as 1 percent after the Nikkei posted its worst rout in nine months. Treasuries ticked higher with the dollar as investors’ focus turned to efforts to avert a U.S. government shutdown later this week. Traders are also trying to stay on top of U.S. tax reform developments. Elsewhere, sterling weakened as attempts to rescue Brexit talks appeared to stumble, while the loonie fell sharply after the Bank of Canada reiterated a cautious approach to rate hikes despite improving economic data.

Light Data Docket

It’s a fairly light day for economic data in the Asia-Pacific region. Australia’s monthly trade surplus is forecast to slim to A$1.4 billion in October, while the November reading of the country’s Performance of Construction Index, which has moderated in each of the past three releases, is also on the docket. We’ll also get the weekly update of Japanese international securities transactions, followed by the preliminary release October’s leading and coincident indexes. On Wednesday, the Reserve Bank of India elected to keep its benchmark repurchase rate unchanged at 6 percent, with Governor Urjit Patel outlining hopes that the government’s bank recapitalization plan will help spur a pick-up in capital spending going forward.

 

And finally, here’s what Adam’s interested in this morning

 

Europe is enjoying the fastest economic growth in a decade. And leading indicators that help us forecast the future path for its economy are now at multi-decade highs. That should be an environment in which banks can flourish — they reap the rewards of higher credit growth and lower levels of non-performing loans. Earnings should grow as a result. Despite this, share prices of commercial lenders are lagging behind their U.S. peers.

While America’s KBW index of lenders has doubled over the past five years, the Stoxx Europe 600 Banks index has made little headway. European banks now have a huge valuation buffer relative to their own historical average but also in comparison to banks in other parts of the world. With this improving earnings backdrop, a euro-zone economy that’s flying, plus the discount these shares now trade at, the argument is getting stronger for going against the herd and snapping up some banks’ stocks.

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