Trade of the Day: Asian stocks weaken but US futures climb as Treasuries ease; gold, oil firm
Quote of the Day: “Our current paradigm is simply at the end of the road. It’s an environment where negative yields are now used to discriminate against access to mortgages for low income households, the elderly and students as regulatory capital requirement demands make credit hurdles too high for that group to get credit. Instead, they rent at twice the price of owning – a tax on the poor if ever there was one, and a driver of inequality. Thus, we are denying the very economic mechanism that made the older generations ‘wealthy’ and risk driving a permanent generational wealth gap” – Steen Jakobsen, Chief Economist at Saxo Bank, in reference to the global economy.
Stock of the day: Tech giant Tencent overtook e-commerce behemoth Alibaba as the most heavily traded stock on the Hong Kong Stock Exchange. Alibaba had been topping the turnover table since its listing on the exchange last month. Tencent traded turnover was HK$4.2 billion versus HK$3.83 billion for Alibaba which is still the larger company by market capitalization at HK$4.1 trillion. Tencent market capitalization tops HK$3.1 trillion.
Number of the Day:. $4.1 billion: Orders for China Resources Land perpetual bonds within a few hours of their launch despite paying a low coupon of 3.75%. Perpetual bonds are never repaid unless the company decides otherwise.
Tip of the Day: Schroders upgraded global growth to 2.6% and expects a rebound in Chinese equities and other export-oriented markets such as Korea and Taiwan, where valuations are attractive. It expects Asian central banks to maintain easing policies and this would support Asian credits. It said equities will be driven more by multiple than by earnings, and in the US favored the NASDAQ over the S&P500 on expectations the liquidity-driven rally should continue for the technology sector.
Asian investors dumped risk amid jitters the United States was broadening its trade war with tariff measures on imports from Argentina, Brazil and France, risking retaliatory measures from these countries. The MSCI Asia index outside Japan fell 1% while the Japan Nikkei index retreated 0.64%. The Hang Seng benchmark was off 0.2% with losses in energy, technology and holding company sectors overwhelming the gains in utilities, healthcare and consumer sectors.
The United States Trade Representative Office proposed taxes of up to 100% on French products after concluding France’s Digital Services Tax discriminates against US companies. This followed tweets by the US President Donald Trump saying that he would restore tariffs on steel imported from Brazil and Argentina even as data showed US factory activity contracted for a fourth straight month in November.
“Investors were taken aback when President Trump threatened to reimpose tariffs on Argentinian and Brazilian steel and aluminium,” said DBS fx strategists. ”These were warnings that US tariffs could proceed as planned on December 15 without a trade deal.”
The United States is set to slap an additional 15% tariff on $156 billion of Chinese imports starting December 15, but it could be avoided if a trade agreement is struck.