Chinese regulators defend the nation’s wide-ranging crackdown. Janet Yellen seeks action to avoid U.S. economic catastrophe. The global housing market is broken. What you need to know this Monday morning.
China’s top regulators defended their market-roiling crackdown on various industries in a meeting with Wall Street executives, while reassuring them the stricter rules aren’t aimed at stifling tech companies or the private sector. China Securities Regulatory Commission Vice Chairman Fang Xinghai said recent actions were to strengthen regulations for companies with consumer-facing platforms, and improve data privacy and national security, according to a person familiar with the talks. Last week a fresh round of measures aimed at casinos battered Chinese stocks once again. Meanwhile, here’s why LGBTQ groups, feminists, and effeminate men are in China’s crosshairs.
Stocks looked set to fall Monday amid challenges for markets from the debt crisis at China Evergrande Group and a Federal Reserve meeting this week that’s expected to hint at moving toward scaling back stimulus. Futures for Australia and Hong Kong fell. The S&P 500 slid the most in a month Friday, a selloff that poses a challenge to the dip-buying psychology in the U.S. Meanwhile the offshore yuan — the exchange rate for China’s currency trading outside of the country — is about to become the center of attention for investors, as they brace for any fallout from a potential Evergrande default. And China will continue efforts to stabilize commodity prices using a variety of measures, according to Premier Li Keqiang.
Treasury Secretary Janet Yellen renewed her call for Congress to raise or suspend the U.S. debt ceiling, saying the government will otherwise run out of money to pay its bills sometime in October. Writing in a WSJ op-ed, she said "the overwhelming consensus among economists and Treasury officials of both parties is that failing to raise the debt limit would produce widespread economic catastrophe." The House will vote this week on raising the $28 trillion debt ceiling. Meanwhile, House Democrats could initially hold off on sending a $550 billion infrastructure bill to President Joe Biden for signature, in a bid to help keep the party united and his economic agenda on track, one senior lawmaker said.
Australian concerns about French-built submarines did not come as a surprise to Paris, Prime Minister Scott Morrison told reporters, defending a decision to scrap a $66 billion deal with France and opt instead for U.S. nuclear subs with greater capabilities. He said it would have been “negligent” to not opt for craft with supreme capabilities. But French President Emmanuel Macron isn’t ready to forgive and forget. After recalling his ambassadors to Washington and Canberra, French officials say Macron is looking for an adequate response. He is due to speak with U.S. president Joe Biden in the coming days.
Soaring property prices are forcing people all over the world to abandon all hope of owning a home. Democratic and authoritarian governments alike are struggling with the consequences, and an entire generation is at risk of being left behind. In a nutshell, the global housing market is broken, and entire countries are being divided.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours:
And finally, here’s what Cormac’s interested in today
Despite the wave of commentary in recent months on Federal Reserve tapering — which is only going to intensify into year end — global demand for Treasuries looks as robust as ever. Foreign holdings of U.S. government debt rose to a record $7.5 trillion, according to the latest figures from the Treasury Department, thanks to a pick up in demand from Japan and China. Admittedly the data only goes to July, but demand at Treasury auctions over recent months has also continued to show robust foreign interest. Foreign purchases come even with benchmark Treasury yields expected to climb to 1.6% by the end of the year (from 1.36% Friday), according to economists surveyed by Bloomberg.
Some market strategists see yields rising to 2%. But a quick look at the yield curve has to call those forecasts into question. The spread between five- and 30-year Treasuries has flattened to its lowest in over a year, as the rise in inflation expectations petered out. That suggests the bond market is not concerned about the recent climb in energy prices nor the risk of a disorderly taper. With a delay to an expected Fed tapering announcement this week still a possibility, yields could drift even further below consensus forecasts, with just over three months of the year left to go.
- Cormac Mullen is a Markets reporter and editor for Bloomberg News in Tokyo.
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