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China tells North Korean companies to shut down, the return of the steepener, and a data dump from Japan and South Korea . Here are some of the things people in markets are talking about.
Closed for Business
China told companies in North Korea operating inside its borders to shut down as the world’s second-largest economy looks to comply with sanctions levied against the rogue state. U.S. Secretary of State Rex Tillerson is poised to visit China this weekend, with discussions about pressure brought to bear on Kim Jong Un’s regime high on the agenda. A spokeswoman from the Russian foreign ministry said that North Korean officials would meet with their Russian counterparts in Moscow on Friday. Meanwhile, the snap election called by Japanese Prime Minister Shinzo Abe to capitalize on a boost in popularity now looks to be a two-horse race.
Enter the Steepener
The spread between long and short-term U.S. government bond yields has swelled over the past two sessions as investors wager that flattening is over. One trader has booked paper profits of more than $10 million after betting on this steepening of the curve on Wednesday. The prospects for progress on tax reform has helped push the 10-year Treasury yield above its 200-day moving average. According to the American Enterprise Institute, the proposed tax plan could produce a “sugar high” for job growth. Some strategists, however, believe Fed Chair Janet Yellen’s intention to keep raising interest rates despite below-target inflation only bolsters the case for owning duration. Indeed, a strong seven-year Treasury auction on Thursday suggests the bloodletting in bonds may be poised to abate for now.
There's a deluge of data from South Korea and Japan to end the week. The economic events started with the release of South Korean business surveys on the state of the manufacturing and non-manufacturing sectors for October, both of which came in softer than the previous print. Up next at 8:00 a.m. Tokyo time is South Korea's current account balance for August, as well as industrial production, forecast to rise 0.5 percent month-on-month in August on the heels of a 1.9 percent boost in the prior reading. It's also jobs day in Japan, where the unemployment rate is projected to hold steady at 2.8 percent in August with the job-to-applicant ratio ticking up to 1.53. Economists anticipate that national headline and core inflation accelerated by two tenths of a percentage point in August, to annual rates of 0.6 and 0.7 percent, respectively. Retail sales are expected to drop 0.5 percent month-on-month in August, while the preliminary reading of industrial production perks up by 1.8 percent on a monthly basis. The summary of opinions from the Bank of Japan's meeting this month is also slated to be released. On the docket elsewhere: the monthly change in New Zealand's building permits in August, Vietnamese third-quarter GDP figures, and Australian private sector credit growth for August.
The S&P 500 Index and Russell 2000 Index closed at record highs Thursday, with the former gauge poised for its eighth straight quarterly advance. Tech and material shares paced gains. While investors expect the stock market to plunge later this year, they’re also prepared to use that as a buying opportunity. The Bloomberg U.S. Dollar Spot Index gave back some of its tax plan-induced gains, falling against all G-10 currencies. West Texas Intermediate futures sank amid concern that buoyant U.S. production would prolong the oil glut.
Nikkei 225 futures are trading slightly to the downside ahead of the open amid widespread strength in the Japanese yen on Thursday, while S&P/ASX 200 futures are modestly in positive territory despite some tough times for iron ore. The MSCI Asia Pacific Index is limping into its best quarterly winning streak since 2013, with the benchmark gauge retreating on Thursday. Friday marks the last trading day for Chinese shares before a week-long holiday. Meanwhile, strategists at Morgan Stanley are uber-bullish on Indian stocks, saying that “the party has just begun” amid a government push to get pensions more invested in equities.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- Chinese capital flight still propping up global housing markets.
- Name-dropping ‘bitcoin’ pays off for companies.
- The world’s biggest real estate bubbles.
- Brexodus begins at U.K. banks.
- High rollers on holiday flock to Macau.
- Bannon is back – and he’s eyeing China.
- Want to know Trump's next move? Check Rubio's twitter feed.