Trump meets Xi in China, RBNZ delivers a hawkish hold, and U.S. tech titans save the day. Here are some of the things people in markets are talking about.
…in a China Shop
U.S. President Donald Trump is in Beijing, where he’ll look to wrestle concessions from Chinese President Xi Jinping on matters of trade and geopolitics ahead of a joint press conference to be held on Thursday. By Trump’s standards, there’s lots of room for improvement on the former: China’s trade surplus with the U.S. through the first 10 months of this year was $223 billion, and there haven’t been any big wins on trade so far during Trump’s Asian tour. A boon for the U.S. leader, however: Chinese executives view him more as a dealmaker than someone who’ll cut off their access to the world’s largest market.
Hawkish Hold from the RBNZ
The Reserve Bank of New Zealand kept policy unchanged in its Thursday decision but indicated an interest rate hike could come sooner than previously expected thanks to a pick-up in inflation. The kiwi surged. Coming up, Chinese inflation data is the highest-profile release on the docket, with consumer prices projected to accelerate to an annual rate of 1.8 percent in October, while producer prices moderate to 6.6. percent year-on-year. There’s also a bevy of Japanese data due out: weekly international securities transactions, core machine orders for September, and the current account balance. Economists anticipate that Australian home loans rose by 2 percent in September, data that would clash with UBS Group AG’s call that the nation’s real estate boom is “officially over.”
The Nasdaq Composite Index, S&P 500 Index, and Dow Jones Industrial Average rose as strength in technology stocks dragged major gauges into positive territory, even as Democratic victories in Tuesday’s elections further muddied the path forward for U.S. tax reform. Financials were bludgeoned, with the KBW Bank Index down 0.9 percent. For U.S. traders, tomorrow marks the one-year anniversary of the last time the VIX Index – commonly known as Wall Street’s fear gauge – cracked the important psychological level of 20. Oil was whipsawed, with West Texas Intermediate futures jumping on news of platform closures in the Gulf of Mexico before dipping after the weekly U.S. crude inventory report showed an unexpected build in stockpiles.
Clean Up Your Act
Red China is going green. A testament to the country’s commitment to an anti-pollution push: iron ore imports slumped to their lowest level in more than a year in October. Likewise, steel production and exports have dropped – undercutting Trump’s gripe that the country unfairly dumps on global markets. And at least for now, there’s a new holder of the inauspicious title of most toxic city: the air in New Delhi contained roughly 10 times the level of carcinogenic pollutants as Beijing on Wednesday.
Nikkei 225 and S&P/ASX futures are trading slightly to the upside ahead of the open after a session in which they both finished little changed. China’s Tencent Holdings will be closely watched after taking a stake of roughly 12 percent in Snap Inc., the parent company of the beleaguered Snapchat app.
And finally, here’s what David’s interested in this morning
At about mid-morning, global news wires will be inundated with Trump/Xi-related headlines. So as that happens, don’t forget China producer prices are due out at about the same time. For the billions who religiously follow this newsletter, you’ll know this is my absolute favorite economic indicator globally. It holds so much sway you can almost treat it as the trailer of the feature film that is the swath of global data set to follow weeks after. If you need proof, have a quick glance at producer prices in Europe released early this week or the latest results from Caterpillar, Komatsu, etc. Some of these are on the chart below.
Looking beyond today’s release, this may hold up further into year-end. Commodities, especially oil, have been a on a tear since early October. Second, pollution’s come early this year. Beijing and Shanghai had really bad pollution days during the first few days of November – which means output shuttering drive from Beijing potentially kicks into higher gear. Those two tend to lead this. Finally an interesting tidbit, I had a look at data these last 11 months. It seems estimates from economists tend to overshoot the actual readings when PPI falls from the previous month and tend to underestimate the months when PPI rises. So looking at forecasts for October, I won’t be surprised if this came in around 6.4 percent. Still not bad though.