|Ten-year U.S. Treasury yields surged to the highest since 2011 as indicators about American jobs and services showed continued strength. Here are some of the things people in markets are talking about.
A Big Day for Treasuries
The yield on 10-year Treasuries, a benchmark for global borrowing, rose to the highest level since 2011 amid growing optimism about the U.S. economy. The rate on 30-year securities reached a four-year high and the dollar gained. Improved investor appetite for riskier assets drove the leap in yields, with stocks rising toward records on upbeat news about American jobs and ebbing concern about the fiscal situation in Italy. The jump in yields Wednesday, which pushed them above previous 2018 highs set in May, followed stronger-than-anticipated reports on U.S. services and private payrolls and came after the Federal Reserve lifted interest rates last week. Meanwhile, Asian stocks were set for small gains on Thursday morning after U.S. equities edged higher.
Foreigners to Rescue China Shares?
As President Donald Trump slaps tariffs on China and an economic slowdown looms, foreign investors are coming to the rescue of the nation’s ailing stock market. That help could send stocks soaring by year end, said Thomas Dongming Fang, Hong Kong-based Head of China Equities at UBS Group AG. “I would definitely be a buyer from here,” Fang said in New York after China’s benchmark CSI 300 index capped a 15 per cent year-to-date drop. However, the biggest exchange-traded fund tracking Chinese equities tumbled after JPMorgan Chase & Co. downgraded the nation’s stocks, forecasting a “full-blown trade war” next year.
Singapore Flexes M&A Muscle
Singapore Inc. is stirring, with companies from real estate to engineering becoming bolder in their hunt for acquisitions abroad. Companies in the city-state announced around $91 billion of overseas deals this year through September, more than double the $41.9 billion of transactions for the same period of 2017, data compiled by Bloomberg show. Temasek Holdings Pte and GIC Pte still loom large, but increasingly others are inking their biggest-ever transactions to put Singapore on the world stage. The flurry of activity shows a new determination by firms to adopt a more aggressive stance amid an escalating trade war between China — one of Singapore’s closest neighbors — and the U.S.
Easing for India’s Refiners
India’s central bank eased norms for state-run refiners to borrow money from overseas markets, in a bid to support the rupee by stemming dollar demand from oil importers. The Reserve Bank of India removed a $750-million cap each on state-run refiners including Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp. for borrowing overseas under the so-called automatic route, subject to an overall limit of $10 billion, according to a statement. The RBI also waived off mandatory hedging requirements on the borrowings. Separately, nothing seems to be helping India’s sovereign bond market. The optimism spurred by the government’s decision to cut its borrowing plan proved fleeting as tax collections failed to meet the target for a fifth straight month.
Fines for Fan Bingbing
China ordered one of its top actresses and her associated companies to pay about 884 million yuan ($129 million) in taxes and fines, capping a months-long tax evasion probe that shook the nation’s blossoming entertainment industry. Fan Bingbing was personally fined about $70 million, with the remainder involving back taxes and fines against companies affiliated with the star, the official Xinhua News Agency reported Wednesday. In the first post in months on her Weibo social media account, Fan, 37, said she was deeply ashamed of her crimes and apologized to tax authorities and the public. Fans had been worried about her after she disappeared in June, when the probe on her tax filings was launched.
What we’ve been reading
This is what caught our eye over the last 24 hours.
And finally, here’s what David’s interested in this morning
As the old adage goes, India is successful despite its government, while China is successful because of its government. Each political system obviously has its own advantages and limits. When it comes to addressing structural issues, in India things move much, much more slowly.
The major story there these last two weeks is the troubles of shadow lender IL&FS and its subsequent “rescue” by the government. It’s cast an unflattering spotlight on a bigger issue — the urgent need to reform India’s financial system. The country’s banks have some of the world’s worst non-performing loans data. And the lack of private investment in the economy is a symptom of that handicap. China faced a similar bad-asset problem in the 1990s. But because the lenders were virtually all state-owned and China was effectively a command economy, all it took was a few years of balance sheet rejigging to get the banks ready for those massive IPOs during the 2000s. As for India, finding a fix has recently become a priority, with regulators enforcing painful reforms. It’s been a tough operating environment for the banks. But as David Marshall, senior banks analyst at CreditSights, points out, India’s democratic political structure limits its ability to self-inflict the prolonged economic pain necessary to solve the problem, at least quickly.