Dramatically different Covid-19 variant identified in Africa. China’s economy continues to slow. Beijing warns Germany’s new leader against meddling in its internal affairs. Here’s what you need to know today. Happy Friday, Asia.
Scientists in South Africa are studying a new coronavirus variant of “serious concern.” The new discovery, called B.1.1.529 until a Greek letter is assigned to it by the World Health Organization, carries an unusually large number of mutations and is “clearly very different” from previous incarnations. The U.K. will temporarily ban flights from South Africa and five other African countries over worries about the new variant. Meanwhile, authorities say Hong Kong has fulfilled the basic conditions for quarantine-free travel with mainland China. A study by Hungarian researchers found that Moderna and Sputnik V vaccines were more effective than Pfizer, based on data from more than 3.7 million inoculated people. And vaccinating pregnant women had no effect on birth outcomes, according to a U.K. study, bolstering the safety profile of the shots during pregnancy.
Asian stocks looked set for a mixed start at the end of a week in which Treasury yields and the dollar jumped amid bets on faster Federal Reserve policy tightening as the pandemic recovery stokes inflation. Crude oil slipped as traders weigh up a planned coordinated release of reserves by consuming nations against the prospect of OPEC+ holding back supply in retaliation. Gold continues to struggle. Bitcoin pushed toward $59,000. Investors poured about $900 billion into stock funds this year, more than the past 19 years combined. And Europe’s Covid lockdowns put $50 billion of bonds on the cusp of junk grade.
China’s economy continued to slow in November, with car and homes sales dropping again as housing-market woes dragged on. Meanwhile, the debt crisis engulfing China’s property sector is threatening to upend developers that have borrowed billions in green debt. Kaisa and Fujian Yango now face “inevitable” default scenarios, according to S&P Global Ratings, which cut both issuers’ credit ratings deep into junk territory before withdrawing its assessment on both earlier this month. Together, the developers and their units sold at least $1.9 billion in ethical debt.
China warned Germany’s new government against meddling in its internal affairs, hinting at potential damage to relations unless it acknowledges China’s claim on Taiwan. Chancellor-in-waiting Olaf Scholz has unveiled a program that pledged to call out China on human rights, urged it to loosen its grip on Hong Kong and committed to backing Taiwan’s participation in international organizations. Meanwhile, Australia will send soldiers and police to the Solomon Islands in a bid to help quell violent protests that have been linked to the Pacific nation’s decision to switch its diplomatic alliance to China from Taiwan.
The $410 DeliSofter pot looks much like the rice cookers ubiquitous in Japanese households and it does prepare rice in 24 minutes. But this invention of two female Panasonic engineers is designed to do more and help people with swallowing difficulties. They led the creation of a spin-off company, Gifmo, to sell the specialized steam cooker, which they say can turn fried chicken soft enough to be sliced with a potato chip.
What We’ve Been Reading
What’s caught our eye over the past 24 hours:
And finally, here’s what Cormac’s interested in today
With all the focus on ever sooner Fed hikes, it’s often a useful exercise to look further out the calendar to see when investors expect the next rate cut — particularly given concerns over a potential policy error. Eurodollar traders are expecting about six hikes over the next two years — starting in 2022 — before a rapid tail off with less that one priced in for 2024. In 2025, markets are very close to betting on lower rates for the first time. That seems too far away to suggest Eurodollar traders are in the policy error camp.
Still, their Treasuries counterparts are less certain, with the 5-year/30-year yield curve flattening to a new low for the year on Wednesday. That ties in more with a potential policy mistake scenario than expectations for a normal cycle of rate hikes as the U.S. economy continues to expand. The focus on 2022 continued Wednesday after the Fed’s most recent meeting minutes disclosed concerns that elevated inflation may spur a faster pace in tapering bond purchases. But keep an eye on bets further out as a way to gauge whether the market believes potential central bank action will be successful in keeping the recovery going or not.
Cormac Mullen is a Deputy Managing Editor in the Markets team for Bloomberg News in Tokyo
— With assistance by Cormac Mullen
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