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Blowout earnings for Chinese banks, a huge day of data, and it might be morning in America again. Here are some of the things people in markets are talking about.
Chinese Banks Beat
The four largest Chinese banks are poised for a big day after reporting better than expected second-quarter net income after the close of trading on Wednesday. Economic resilience helped non-performing loan ratios moderate at Bank of China Ltd., Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., and Agricultural Bank of China Ltd. The government's ongoing campaign against leverage, which has entailed higher interbank rates, has acutely benefited the larger lenders via margin expansion and a return to traditional loan growth. The real risks in China’s financial system may lie more with smaller regional lenders, according to analyses performed by UBS Group AG and Fitch Ratings, because of their role in fueling shadow banking in the world's second-largest economy.
A massive day of economic data in the Asia Pacific region awaits. China’s official manufacturing purchasing managers’ index for August, forecast to moderate a tick to 51.3, headlines the excitement. It’s due out at 10:00 a.m. Tokyo time, along with the non-manufacturing print. The share of payments made via SWIFT in renminbi, a gauge for the internationalization of the currency, will also be released at that time. Earlier, at 8:50 a.m., Japan will release its weekly international financial transactions figures along with the preliminary reading of industrial production for July, projected to drop 0.3 percent month-on-month after a 2.2 percent advance in the prior reading. It’ll be followed later in the day by July’s vehicle production, housing starts and construction orders for the island nation. Other July data on deck include South Korean industrial production, Australian private sector credit growth, and Thailand’s trade balance.
Morning in America?
The Bloomberg Dollar Spot Index posted back-to-back gains for the first time in two weeks as economic fundamentals testified to the strength of the U.S. economy and labor market. Revised growth figures for the second quarter showed the U.S. grew at a 3 percent clip, the fastest in two years. Consumer spending and business investment were stronger than initially reported. Meanwhile, employment figures from the ADP pointed to better than expected job growth in August ahead of Friday's closely-watched non-farm payrolls report. Ten-year Treasury yields edged higher after sinking to their lowest level of the year on Tuesday. U.S. President Donald Trump may have added to the optimism by championing tax reform that would reduce the corporate rate to 15 percent during a speech in Missouri, in which he thanked several top officials for their work on the file -- but not Gary Cohn.
Remember the Tech Titans
The S&P 500 Index gained 0.5 percent on Wednesday led by -- yet again -- tech stocks, including the FANG quartet. The Nasdaq Composite rose more than 1 percent. Safe havens like gold and the Swiss franc fared poorly. Major refinery closures mounted due to the damage from hurricane Harvey, propelling gasoline prices to two-year highs. The weekly report from the Energy Information Administration -- showing stockpiles of crude slid for the ninth straight reading -- didn't carry as much weight this time around in light of the storm’s disruption to the U.S. energy industry. West Texas Intermediate futures were briefly buoyed by the news before sinking back into the red, closing at their lowest level in five weeks.
S&P/ASX 200 futures and Nikkei 225 are virtually unchanged ahead of the open. The Japanese index may receive some more technical report after managing to close above its 200-day moving average in recent sessions despite the ongoing geopolitical turmoil. The MSCI Asia Pacific Index gained Wednesday in the absence of an escalation of tensions between North Korea and its neighbors as well as the U.S.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- Trump says talk with North Korea is not the answer.
- BOJ wishes the rain, rain, would go away.
- Hedge funds keep the mojo going.
- Chinese companies embrace "Made in America" via robots.
- UFC has an Asian challenger.
- New Uber CEO hints at 2019 IPO.
- Japan "too polite" to reveal true feelings about Brexit.