Bitcoin mania gets even more manic, Alibaba hits traders with a megabond, and warnings on Hong Kong real estate. Here are some of the things people in markets are talking about.
Bitcoin Soars Past $11,000, Then Promptly Plunges
(Bloomberg)-Forget about $10,000. Bitcoin surpassed $11,000 just hours after hitting the five figure milestone. Yet before the U.S. session was done, the cryptocurrency tumbled as much as 20 percent from its peak, wiping more than $2,000 from its price. The euphoria is bringing into the mainstream what was once considered the provenance of computer developers, futurists and libertarians seeking to create an alternative to central bank-controlled monetary systems. Some on Wall Street are embracing the run, with more than 100 hedge funds now dedicated to digital currencies. Others are issuing dire warnings, with Nobel Prize winner Joseph Stiglitz saying it ought to be outlawed as it “doesn’t serve any socially useful function.” Here’s a wrap of what bitcoin watchers are saying about the recent surge. No bets on where it will be this time tomorrow.
Chinese e-commerce giant Alibaba is issuing $7 billion bonds in the biggest dollar-denominated offering by an Asian corporate issuer this year. The new bond sale comes after the company struck a $2.9 billion deal earlier this month to buy a slice of China’s largest hypermart chain Sun Art Retail Group to pit it against Wal-Mart in the world’s largest retail market. Alibaba is offering the notes in five parts, with maturities of 5.5, 10, 20, 30 and 40 years, according to people familiar with the offering. The deal was felt in the market for U.S. government debt, with the long end of the Treasury curve coming under pressure as funds made room for the securities and dealers hedged their exposure.
Dire Warning For Hong Kong Real Estate
The IMF is telling people to be cautious when it comes to the world’s most expensive housing market. The agency said Hong Kong real estate could cool next year if the Federal Reserve delivers the rate hikes it has projected, describing Hong Kong’s property market as “booming and overvalued.” The outlook comes as Hong Kong’s red hot property sector shows few signs of a slowdown with price gains of 11 percent this year even after the government pushed through new taxes and mortgage curbs. The next Fed meeting comes Dec. 12-13 in Washington, with economists forecasting policy makers will raise the benchmark interest rate by 25 basis points. Higher borrowing costs in the U.S. and elsewhere in the world would increase Hong Kong’s debt burden and suck capital away from the finance hub, though the authors of the report added that authorities have tools to respond.
U.S. stocks slipped as a selloff in technology shares hit the major indexes. The Nasdaq 100 Index fell as much as 2.2 percent as signs of a rotation from the year’s leaders emerged anew, spurred by tax legislation in the Senate that’s viewed a less beneficial to the sector compared to others. The FANG block of megacap tech companies that paced gains throughout the year fell the most in 22 months. Goldman Sachs warned clients about current stock valuations. In the U.K., gilts dropped and sterling jumped as investors brought forward their expectations for the next interest-rate increase by the Bank of England after Brexit negotiators agreed to an outline divorce deal. Elsewhere, oil declined before OPEC meets to decide on prolonging supply cuts past the end of March, the dollar fluctuated and 10-year Treasury yields rose.
Asia’s traders will finally have some data to sink their teeth into this week as Thursdaybrings a sudden flood of key reports. China’s manufacturing PMI is the headline, with analysts forecasting the gauge will post its first two-month decline since January. If it does, markets will be seeking to judge whether it’s just part of the economy’s transition away from a growth-at-all-costs model or indicative of a deeper slowdown. The Bank of Korea may raise interest rates for the first time in more than six years. Australia reports third quarter Capex, including the survey of expected future investment plans, and October building permits. Japan and South Korea detail industrial output figures. Later on, OPEC and partners meet in Vienna to discuss extending oil output curbs, while ECB Executive Board member Peter Praet delivers the Ludwig Erhard Lecture in Brussels. There are some meaty European data points coming too, including euro-area CPI and unemployment, German and Italian unemployment, and GDP reports for Spain and Switzerland.
And finally, here’s what David’s interested in this morning
Everything’s been on the up on the Korean peninsula — from tensions and ICBMs, to economic growth, share prices, and bond yields. And by mid-morning today, the central bank’s main policy rate is expected to join that list. Bonds have been telling us for some time now the Bank of Korea’s next move was up. And having seen the BOK itself upgrade its growth forecasts recently, conditions look ripe for the first hike in over seven years.
I revisit this chart above ahead of BOK meetings to get a sense of overall positioning in sovereign bonds. The last three changes were preceded by the three-year yield moving below the bank’s seven-day repo rate. The opposite’s obviously been taking place with the spread widening back to 2011 levels. The BOK better hike or the bond bears take it smack on the chin today. Potentially though, it’s the post-decision commentary from Governor Lee which traders will be more attuned to. Don’t forget that household debt and the value of the currency have also been on the up — issues that may turn into problems with rates moving higher. So we’re hitting this big today on Bloomberg TV. We’ll be live from Seoul with my colleague Stephen Engle. And throughout the morning, analysts from HSBC, Goldman Sachs, CLSA, and Nomura International join us on the shows to parse through the key issues.