The Bitcoin battle heats up
The dollar’s winning streak reaches the longest since December as its correlation with Treasury yields continues to show signs of revival. And trade worries ease as the U.S. backs off hard-line stances with China and Russia’s United Co. Rusal. Here are some of the things people in markets are talking about.
Dollar Jumps, 10-Year Treasury Yield Flirts With 3%
The greenback rose to the highest level since January partly on the back of rising Treasury yields, as the benchmark 10-year note got within half a basis point of 3 percent before paring losses. U.S. stocks declined for a third day, with a slump in shares of technology companies weighing on major indexes. Crude posted a late-session comeback to finish in the the green. The Mexican peso paced losses among major currencies as investors begin to accept that the next president is likely to be the populist firebrand they feared.
U.S. Softens Russia Sanctions
The U.S. softened its position on sanctions against Russian metals giant United Co. Rusal, sparking a record plunge in aluminum prices. For the first time, the U.S. Treasury discussed a path for lifting the sanctions on Rusal, saying it would provide relief if Oleg Deripaska relinquished control. It also extended the deadline for companies to wind down dealings with the Russian aluminum producer by almost five months. Aluminum prices fell as much as 9.4 percent, the most ever. The move comes on the heels of comments from U.S. Treasury Secretary Steven Mnuchin that he’s considering a trip to China amid an ongoing trade dispute with Beijing.
Compared with a month ago, only half as many economists now expect the Bank of Japan to adjust its monetary policy this year — and none expect action at Friday’smeeting. Only seven of 47 economists surveyed by Bloomberg said they expect any change this year, down from 14 in March. Most see no change until at least April 2019.
Vanguard Brings its $5 Trillion Show to China
Vanguard Group amassed $5.2 trillion of client assets and revolutionized the U.S. investment industry by offering low-cost funds to millions of Americans. Now it wants to do something similar in China, even if the strategy takes years to bear fruit. The firm is laying the groundwork for a China expansion made easier by the nation’s opening to foreign asset managers. Vanguard is on track to more than double the size of its Shanghai office this year and may seek approval to sell products to wealthy investors as a first step before seeking a foreign-owned mutual fund license when regulators allow it in 2021, said Charles Lin, the firm’s China head.
Bitcoin Battle Heats Up
Bitcoin Cash is the hottest cryptocurrency around right now for more reasons than you may imagine. The offshoot of the biggest digital token has surged about 25 percent since Friday, in part because Antpool, one of the largest mining groups, is “burning” a portion of the coins it receives in exchange for solving the complete mathematical puzzles that serve as the backbone of the network, potentially reducing supply and driving up the value. The maneuver is the latest salvo in an escalating battle between backers of Bitcoin and Bitcoin Cash, which was spun off last year. Through a war of words playing out on Twitter and Facebook, some of the largest holders of both cryptocurrencies are attempting to influence the coins’ prices after seeing significant losses since last year.
And finally, here’s what David’s interested in this morning
Caterpillar results are due out today before U.S. cash markets open. It’s time to dig out and excavate one of my favorite charts on the topic. It tracks the change in the company’s three-month sales in the Asia-Pacific region and juxtaposes the metric alongside one of its key drivers — Chinese producer price inflation. Last year’s recovery in wholesale price inflation was reflective of pricing power coming back. That in turn helped the capex outlook, which then stimulated demand for things like excavators, loaders, trucks, and pipe layers. Fast forward to today and the question is whether the five-month moderation in Chinese PPI will show up in the results. Equally, will they provide the latest proof that underlying economic activity has indeed rolled over from the highs of late last year?
The historical relationship suggests they will. But our analysts at Bloomberg Intelligence think earnings will beat consensus. In fact, they think guidance for the rest of this year will even be raised. Now, if we do see softer numbers, consider that we’re coming off a growth clip of 41 percent, so moderation doesn’t exactly mean contraction. Makes tonight’s release all the more compelling! Numbers out 19:30 p.m. Hong Kong time.
This section in Monday’s newsletter included a chart showing a Philippine stock plunge instead of a chart on Malaysian stocks. The correct chart is included below.
Oil prices and dollar-ringgit are basically mirror images of each other — and oil’s been on a tear. Big event risk ahead though with Malaysia’s elections on May 9, so volatility picking up is the obvious trade.