Photographer: Chris Ratcliffe/Bloomberg
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Stocks surge, investors doubt Fed tightening plans, and bitcoin goes bananas. Here are some of the things people in markets are talking about.
Risk On Rally Resumes
The S&P 500 Index posted its first daily gain of at least 1 percent since April as risk assets put last week's selloff firmly behind them. Tech stocks led the advance. Tensions in the Korean peninsula appear to be abating somewhat with the chairman of the U.S. Joint Chiefs of Staff, Marine General Joseph Dunford, reassuring South Korean President Moon Jae-in that all parties want to resolve the situation peacefully. The VIX Index tumbled; safe haven assets performed poorly. Oil was also slammed, down more than 2 percent on the session as fears of falling Chinese demand outweighed a temporary disruption to supply in Libya.
Take a Hike
One thing that hasn't fully recovered from last week's retreat: the market-implied likelihood of another interest rate increase from the Federal Reserve by year-end. The odds remain relatively subdued at about one-in-three. In an interview Monday, New York Federal Reserve President William Dudley suggested that he'd favor another hike in 2017 if the economy holds up, and hinted that an announcement on balance sheet shrinkage in September wouldn't be an "unreasonable" expectation. He also said that top White House economic adviser Gary Cohn was a "reasonable candidate" for Fed Chair. The U.S. dollar was the second-best performing G-10 currency on the day, trailing only the Swedish krona, as Treasury yields moved higher. Persistently below target inflation augurs against a more aggressive posture from the Fed: data on Friday showed that core consumer price gains came in below expectations for the fifth straight reading.
The world's most popular cryptocurrency booked another round number milestone, rising as much as 21 percent from Friday on optimism regarding adoption. Bitcoin has skyrocketed during each of the past two weekends. Shares of Nvidia Corp. and Advanced Micro Devices Inc., which sell graphics cards that facilitate the mining of digital currencies, also posted sizeable advances of 8 and 4.3 percent, respectively.
The Reserve Bank of Australia will release minutes from its August meeting — at which it kept rates unchanged at a record low 1.5 percent — at 10:30 a.m. Tokyo time. In recent communiques, monetary policymakers have sought to push back against the notion that an interest rate increase is imminent in a bid to take the steam out of the Aussie dollar's rally. Economic data due out include Australian new car sales and Indonesia's trade figures for July, as well as the final reading of Japanese industrial production in June. We may also get data from China on credit growth after Monday's economic update pointed to slowing activity in the world’s second-largest economy. S&P/ASX 200 and Nikkei 225 futures are trading to the upside ahead of the open after stocks in the region got off to a strong start this week – outside of Japan, which was playing catch-up after the holiday on Friday.
Taking a Stand
Merck & Co. CEO Kenneth Frazier was the object of U.S. President Donald Trump's ire after resigning from the administration's manufacturing council. Trump quickly took to Twitter to say that the pharmaceutical executive would now have "more time to LOWER RIPOFF DRUG PRICES!" However, that didn't stop shares of the drugmaker or its competitors from moving higher, as investors judged that Trump's bark on this file would be worse than his bite. Frazier made the move to "take a stand against intolerance and extremism" in the wake of this weekend's white nationalist rally in Virginia, which was linked to three deaths. Speaking at the White House on Monday, the president explicitly denounced white supremacists after failing to do so immediately following the violence this weekend.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- China puts multilevel-marketing firms on notice.
- Euro-pound parity forecasts emerge.
- The AAA-rated Chinese bonds that trade like junk.
- Oil ‘God’ blames the computers for fund closure.
- Tinder pays off for this Brazilian retail stock.
- Volatility to return after China’s autumn leadership shuffle, says Goldman.
- The last baseball glove made in the U.S.A.