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Trade talks between China and the U.S. take center stage, yet it’s what won’t be discussed that may matter more. And the dollar’s rally will be put to the test amid a busy week of top tier U.S. data and a Fed interest-rate decision. Here are some of the things people in markets are talking about.
Trade Talks on the Agenda
China wil refuse to discuss two of U.S. President Donald Trump’s toughest trade demands when American negotiators arrive in Beijing this week, the New York Times reported. The off the table topics include: a mandatory cut of $100 billion in the U.S.-China annual trade deficit, and curbs on Beijing’s plan to support the country’s industrial upgrade into advanced technologies. Meanwhile, Trump still hasn’t decided whether to extend allied nations relief from U.S. steel and aluminum tariffs, even though temporary exemptions are set to expire today.
Dollar Rally Put to the Test
The dollar strengthened Monday, cementing its best month since November 2016. Bond giant Pimco sees further gains in store for the U.S. currency as a currency cold war reignites, while HSBC said Monday that the dollar bull run is just getting started. The greenback’s rally will be put to the test this week, with a mix of top-tier data and an FOMC decision expected. U.S. stocks sagged Monday, led lower by pharmaceutical and technology shares. Oil jumped after Israeli Prime Minister Benjamin Netanyau came out with accusations against Iran.
Bibi on Iran
Netanyahu said Israel has half a ton of Iranian documents that prove Tehran had a secret program to build nuclear bombs. “Iran lied about never having a nuclear weapons program,” Netanyahu said in a press conference. “After signing the nuclear deal in 2015 Iran intensified its efforts to hide its nuclear files,” he said. After the speech, Trump hinted that he plans to withdraw from the Iran nuclear accord but that he may be willing to negotiate a new agreement with the Islamic Republic.
H.K. Regulator Concerned About Margin Lending
Hong Kong’s Securities and Futures Commission is consulting brokers about risks stemming from a rapid run up in margin lending. Outstanding margin loans hit HK$206 billion ($26.3 billion) at the end of 2017, a nine-fold increase since 2006, Deputy Chief Executive Officer Julia Leung told reporters on Monday. The regulator is worried such lending poses a risk given that many of the firms involved are illiquid and it may take a while for brokers to recover their money in case of a liquidation, Leung said.
It’s likely to be a slow day in Asia, with markets in China, Hong Kong, Singapore and others closed for Labor Day. But there will be action in Australia, where RBA policy makers are expected to hold record-low interest rates for the 20th straight meeting. Tokyo traders will return, giving the Nikkei the chance to catch up on the rally that broke out across the region Monday. In the U.S. Tuesday, Apple earnings will be the highlight. Results are expected to confirm investors’ fears that the iPhone X didn’t live up to the hype, and they’ll be looking for a strategy on what’s next for the company’s most-important product.
What we've been reading
This is what's caught our eye over the last 24 hours.
- Australia's biggest bank was "desensitized to failings with customers," an inquiry finds.
- Israel's Benjamin Netanyahu says Iran had a secret program to build nuclear bombs.
- Trump is eyeing the DMZ for North Korea talks.
- A Goldman trading desk that once had 500 people now has three.
- Elliott Management is considering a push into CLO issuance.
- Indonesia vows to restore calm in financial markets.
- Bloomberg View: In trade talks, China is too clever by half.
- Bitcoin bulls have regained the upper hand.
— With assistance by Garfield Clinton Reynolds