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Geopolitical risks dissipate, China plans to open up its capital markets, and there are Brexit battles on the home front. Here are some of the things people in markets are talking about today.
U.S. Secretary of State Rex Tillerson said that the country is seeking “a peaceful solution” to the nuclear standoff with North Korea, while making it clear that the military option remains on the table should diplomatic efforts fail. President Donald Trump was less confrontational in his weekend tweet on the subject, citing the effects of sanctions while mocking the regime in Pyongyang. He is expected to embark on a whirlwind series of meetings at the United Nations General Assembly this week to discuss both North Korea and Iran. While markets have become somewhat inured to the hermit kingdom’s provocations, optimism that the U.S. will pursue a peaceful resolution helped push Asian equites to their largest one-day gain in two months.
Policy makers at the People’s Bank of China are drafting a package of reforms that would give foreign investors greater access to the financial services industry, according to people familiar with the matter. The yuan’s 6.1 percent advance this year has given the country greater freedom to loosen capital controls, as deflation risks are now largely off the table. On the domestic front, property prices declined in some of the China’s hottest markets last month, indicating that cooling efforts are proving effective.
British Foreign Secretary Boris Johnson put his oar back into Brexit negotiations with an op-ed in the U.K.’s Daily Telegraph ahead of Prime Minister Theresa May’s key speech on the issue later this week. His attempt to revive the campaign promise of 350 million pounds ($476 million) being freed-up for the U.K.’s National Health Service once the country leaves the European Union was met with a sharp rebuke from the head of Britain’s national statistics office. The prime minister is in Canada today concentrating on the battle between Boeing Co. and Bombardier Inc. over state aid, as the Canadian aircraft manufacturer is one of the largest employers in North Ireland, the home turf of the Democratic Unionist Party which she needs to maintain a parliamentary majority.
After the S&P 500 Index passed the 2,500 milestone in the final minutes of Friday trading and geopolitical tensions eased, markets are in a risk-on mood this morning. The MSCI Asia Pacific ex-Japan Index added 1 percent overnight, with Japanese markets closed for a holiday. In Europe, the Stoxx 600 Index was 0.5 percent higher at 5:45 a.m. Eastern Time, while S&P 500 futures are up 0.3 percent. The biggest mover in the sovereign bond market was Portuguese debt, with the 10-year benchmark yield falling 27 basis points to 2.531 percent following the country’s upgrade by S&P Global Ratings on Friday.
While it is fairly quiet on the economic data front today, it is shaping up to be a big week for markets. The main event is the Federal Reserve decision on Wednesday, where the central bank is expected to keep on track for a rate hike in December, and announce how it will start unwinding its $4.5 trillion balance sheet. The Bank of Japan is due to make its latest monetary-policy decision on Thursday, while British Prime Minister Theresa May will outline her Brexit vision in a speech in Florence on Friday.
What we've been reading
This is what's caught our eye over the weekend.
- Odd Lots Podcast: The baseball card bubble can tell you a surprising amount about how markets work.
- Forget default: Deutsche Bank reckons debt market risk lies elsewhere.
- Japanese Prime Minister Abe may call snap general election.
- How Janet Yellen’s report card looks as she nears the end of her first Fed term.
- Superpower India to replace China as global growth engine.
- Why people who think monetary policy is too tight and those who think it is too loose are both right.
- Big oil becomes greener.