|A rally in tech stocks supported U.S. benchmarks, but Trump cast doubt on the success of potential U.S.-China trade talks. Goldman tapped top executives. Here are some of the things people in markets are talking about.
Tech Rally Boosts Stocks
Gains in tech shares pushed U.S. stocks higher for a fourth day, and the dollar fell after a gauge of underlying U.S. inflation proved unexpectedly cool in August. Excluding food and energy costs, the core consumer price index rose 2.2 percent from a year earlier, a Labor Department report showed Thursday, compared with the 2.4 percent median estimate of economists surveyed by Bloomberg News. Equities pulled back from the day’s highs after U.S. President Donald Trump damped expectations of an imminent trade deal with China. While speculation on trade continues to dictate investor sentiment, the consumer price data and the resumption of the tech rally kept shares afloat.
Trump Throws Cold Water on China Talks
The president got ahead of a possible new round of tariff talks with China, boasting he has the upper hand in the burgeoning trade war and feels “no pressure” to resolve the feud. Trump’s Twitter message on Thursday shows he is determined to enter any negotiation showing strength, but risks stoking Chinese fears that he isn’t serious about striking a deal. Chinese officials felt burned by U.S. backtracking in prior talks as the two countries’ trade dispute deepened. Trump’s comment tempered the market’s already cautious optimism over the U.S. government’s proposal for another round of talks with Beijing. The disclosure on Wednesday that the U.S. wanted to renew talks had boosted U.S. stocks and emerging-market assets.
Rise of the Goldman Dealmakers
Goldman Sachs Group Inc.’s investment bankers are completing a takeover of their own firm. Three of the most important roles are going to be held by executives who rose through the dealmaking unit, overhauling the masthead of a firm that for years was Wall Street’s dominant trading powerhouse. The reversal, which began in the wake of the financial crisis, comes complete with a changing of the guard at the very top. Incoming CEO David Solomon on Thursday named John Waldron as the firm’s next president and chief operating officer, the second-most-powerful position in the bank. In the process, he abandoned Goldman’s long-cherished practice of letting top performers split such weighty roles. Consumer-banking chief Stephen Scherr was tapped as chief financial officer.
JPMorgan Joins Doomsday Chorus
How bad will the next crisis be? JPMorgan Chase & Co. has an idea. A decade after the collapse of Lehman Brothers sparked a plunge in markets and a raft of emergency measures, strategists at the bank have created a model aimed at gauging the timing and severity of the next financial crisis. And they reckon investors should pencil it in for 2020. The good news is, the next one will probably generate a somewhat less painful hit than past episodes, according to their analysis. The bad news? Diminished financial market liquidity since the 2008 implosion is a “wildcard” that’s tough to game out. JPMorgan’s Marko Kolanovic has previously concluded that the big shift away from actively managed investing has escalated the danger of market disruptions. This change has “eliminated a large pool of assets that would be standing ready to buy cheap public securities and backstop a market disruption,” strategists Joyce Chang and Jan Loeys warn.
Coming Up …
Friday will bring a data dump from China that investors will be eager to parse. The country will report retail sales, industrial production and fixed-asset investment for August. Enough positive news could help pull the MSCI Asia Pacific index out of its September slump.
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
We get some important data points on China today. Factory output, fixed asset investment and retail sales are out about thirty minutes after cash markets open. Yes, these are backward-looking, but since market sentiment’s been pretty much rock-bottom, good news is equally bargain-basement cheap and the bulls (if they’re still around) need every bit of it that’s out there. The retail sales release in particular takes on slightly more importance this time around. A couple of our reporters in Shanghai have flagged worsening consumer sentiment as one of the risks to at least be conscious of.
Also keep an eye out on retail e-commerce sales. Most people miss that one and just focus on the headline data. Online spending has grown by an average of 33 percent since 2015 while the growth in the overall measure has averaged just 11.5 percent. There’s currently an obsession over how the Chinese economy will hold up amid all the hits it’s taking from different places. J.P.Morgan notes that the contribution to growth of consumption, including services consumption, has picked up notably since the first half of 2017. Separately, if you’re in pain from the tech rout in Hong Kong, or thinking about buying into the upcoming IPOs of hotpot chain Haidilao and food delivery platform Meituan Dianping, this information will probably help you sleep better.