China stocks stage their biggest fall since August, expectations for Draghi keep rising, and the U.S. dollar gets another lift. Here are some of the things people in markets are talking about today.
The Shanghai Composite Index slumped 5.5 percent as authorities in China continued their crackdown on brokerages, with three of the nation’s largest now being investigated for alleged rule violations. After the close, the Securities Association of China announced that it will ban brokerages from financing stock trading using derivatives.
Japan inflation, employment
There was a raft of data from Japan overnight. Core CPI inflation met expectations at -0.1 percent, but the jobless rate unexpectedly dropped to 3.1 percent - the lowest since 1995 - while household spending fell 2.4 percent from a year earlier, well below expectations for it to remain unchanged. The Topix index closed 0.5 percent lower and the Nikkei 225 Stock Average slid 0.3 percent.
From looking at the bond market, it seems that market expectations for further policy easing from the European Central Bank at its meeting next Thursday are getting very high. The ECB has said that it will not buy bonds yielding below its deposit rate. Right now, there are $452 billion of euro sovereign bonds yielding less than -0.3 percent, or 20 basis points below the current ECB deposit rate, implying that markets expect a substantial reduction in that rate. The euro currency's weakness continues, with it posting its worst ever run of weekly losses against the yen, increasing speculation that other central banks will intervene to reverse the trend.
The U.S. dollar's recent strength shows no sign of abating, with the Dollar Index above 100 again this morning and gold dropping to a new six-year low. The Federal Reserve is expected to hike rates at its December meeting, but appears to be trying to fight dollar strength ahead of that decision by encouraging market participants to focus on the pace of tightening - hoping that a gradual liftoff will curtail appreciation of the currency.
Draghi influence beyond markets
It's not just bond and FX markets that are watching ECB President Mario Draghi at the moment. This morning the European Commission released its index of executive and consumer confidence which matched its highest level in four years, coming in at 106.1. Looking to 2016, Draghi may have to take on the role once played by the Fed in the post-crisis world, where geopolitical flare-ups were shrugged off by investors as the U.S. central bank doled out liquidity. Without the Fed, the ECB may become the world's liquidity provider of last resort in time of crisis.
What we've been reading
This is what's caught our eye over the last 24 hours.
- Piketty says inequality is at the heart of Russia's economic woes.
- Biggest oil buyers pick themselves as winners from OPEC meeting.
- Fattest ever U.S. herd signals end to record beef prices.
- Bond ETF sales surge, U.S. ranks last in world debt markets.
- South Korea trains student hackers to fight Kim's cyber elite.
- Peak profitability for U.S. automakers?
- CEO wants $60 million for 1,111 carat diamond.
- What are the chances of an actual currency crisis in China?
Want to receive this post, and more, into your inbox every morning? Sign up here