|SoftBank is mulling the largest public listing ever. Bitcoin slumps below $7,000. And North Korea appears to have a Pompeo problem. Here are some of the things people in markets are talking about.
SoftBank Weighs $90 Billion Value in Mobile IPO
Japanese conglomerate SoftBank Group Corp. is considering seeking a valuation of about $90 billion for its domestic wireless business in a planned initial public offering, according to people familiar with the matter. SoftBank is speaking to advisers about selling a third — or about $30 billion — of the business in the IPO, the people said. Discussions are preliminary and the final valuation will depend on investors’ feedback, they said. A $30 billion IPO would make SoftBank Mobile the largest listing ever, surpassing the $25 billion debut of Alibaba Group Holding Ltd. in 2014.
Bitcoin Leads Crypto Retreat
Bitcoin slipped below $7,000 to its lowest level in three weeks, as seemingly positive sentiment surrounding the largest virtual currency soured over the weekend. The digital token fell onto the $6,000-handle for the first time since July 17. Last month’s renewed exuberance, which saw it rise by almost a third, appears to be fading against the backdrop of a challenging technical picture. A series of lower-highs show how rallies have repeatedly failed to build momentum. The coin fell even in the wake of news that Starbucks Corp. is teaming up with Intercontinental Exchange Inc., which just created a venture designed to more tightly integrate digital currencies into global commerce. Confusion surrounding the news may have spurred a deepening in the decline, which began last Monday. Jamie Dimon’s bearish comments on the coin at an event this weekend may have also triggered selling.
North Korea’s Pompeo Problem
The widening gulf between U.S. Secretary of State Michael Pompeo’s description of nuclear talks with North Korea and Pyongyang’s criticism of his efforts is adding further confusion to the status of negotiations intended to lead to the denuclearization of the Korean peninsula. Twice in recent weeks North Korean officials and state media have rebutted the top U.S. diplomat’s characterization of events and suggested the administration has a myopic focus on denuclearization while ignoring issues such as bringing about a final resolution of the Korean War. Even as President Donald Trump and North Korean leader Kim Jong Un exchange optimistic messages about their push for peace, Pompeo has increasingly become a target of public disparagement from Pyongyang.
Iran Sanctions Restored
The Trump administration moved to restore some U.S. sanctions on Iran and reaffirmed plans to impose tougher penalties on the country’s oil sales in November, as President Hassan Rouhani comes under increasing economic and political pressure to address the crisis. Trump signed an executive order on Monday restricting purchases of dollar banknotes by Iran, preventing the government from trading gold and other precious metals and blocking the nation from selling or acquiring various industrial metals. The measures, which take effect Aug. 7, also target the auto industry, and will ban imports of Persian carpets and pistachios to the U.S. In a televised address, Rouhani said Iran is open to negotiations if the U.S. is “sincere,” but he added that such talks would be meaningless while his nation is being hit with sanctions.
U.S. Stocks Advance, RBA Looms
U.S. stocks rose as strong results from Berkshire Hathaway Inc. lifted financial shares and higher oil prices boosted energy producers. The dollar and Treasuries advanced. The S&P 500 climbed for a third day to reach its highest since January on below-average volume. The pound weakened to an 11-month low on Brexit angst, while Turkey’s lira plunged more than 6 percent as a showdown with the U.S. over a detained American pastor continued to weigh on investor sentiment. Coming up, Australia’s central bank is forecast to hold interest rates at a record low 1.5 percent on Tuesday.
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
China’s latest foreign exchange data is out today. Needless to say, the currency markets will be paying particularly close attention given the yuan’s recent weakness. In fact, today’s release is more interesting because China appears not to have conducted large-scale intervention to defend the currency in July. In other words, any drawdown in reserves would be more reflective of natural outflows, as the central bank would need to match those outbound liabilities by tapping the cash pile. The median estimate from economists indicates an expected drop of a measly $5 billion from $3.112 trillion to $3.107 trillion. Or, put simply, no destabilizing capital outflows.
Speaking of the outflow story, the question of why there hasn’t been anything that even resembles large capital outflows this time around is somewhat of a headscratcher. One theory I’ve heard is that portfolio inflows into China’s bond markets are simply offsetting local money getting out. Another theory is that maybe the yuan’s depreciation against the dollar has happened so rapidly that the relevant monthly data just hasn’t come out; we may get an early peek with reserves today. Or maybe unlike 2015-16, there simply aren’t any outflows (which I would hate to be the case, a it really wouldn’t address the original question). What do you guys think?