Market news

Bloomberg.com — A selloff in China’s currency deepened after the central bank moved to free up capital for banks and as investors braced for the next round in an escalating trade dispute with the U.S. Stocks headed for a two-year low, while bonds rose.

The yuan slid as much as 0.72 percent to 6.5414 per dollar, its weakest since Dec. 28, while the offshore exchange rate dropped for an eighth day. The Shanghai Composite Index declined 0.7 percent and the yield on 10-year debt fell to a two-month low. The People’s Bank of China on Sunday said it will cut the required reserve ratio for some banks by 0.5 percentage point.

A slew of negative factors — from a trade war with the U.S. to the risk of a credit crunch — has weighed on China’s financial markets in recent weeks. The benchmark Shanghai stock index is on the brink of a bear market after tumbling almost 20 percent from its recent high, while analysts have started cutting their forecasts for the nation’s currency. Investors have been piling into the relative safety of government debt instead. […]

Bloomberg.com —  The world’s two most important oil benchmarks are behaving very differently in the aftermath of OPEC’s meeting in Vienna.

Brent crude is being pared back by Saudi Arabia’s pledge to boost output after an ambiguous OPEC pact and contradictory statements from other nations spurred a price jump on Friday, while shrinking stockpiles are supporting West Texas Intermediate. The spread between the European and U.S. markers narrowed more than 15 percent Monday and has almost halved in under a week.

While the prospect of more OPEC crude is weighing on Brent, Goldman Sachs Group Inc. believes even an aggressive output boost will lead to only a slim surplus that would leave the market with little remaining spare capacity. Stockpiles at the biggest U.S. storage hub have slumped for five weeks with the start of the summer driving season when demand peaks. Those declines may accelerate as a Canadian oil-sands outage leaves North America short of supply, propping up WTI, Goldman said.

“The spread between WTI and Brent is shrinking as OPEC’s output increase is having a bigger impact on Brent than WTI,” said Hong Sungki, a Seoul-based commodities trader at NH Investment & Securities Co. “Cushing stockpiles are quickly withdrawing as the U.S. summer driving season boosts refiners’ demand for crude, supporting WTI prices.”

Brent futures for August settlement fell as much as $1.81 to $73.74 a barrel on the ICE Futures Europe exchange, and traded at $74.18 at 3:06 p.m. in Seoul. The contract gained $2.50 to settle at $75.55 a barrel on Friday.

In contrast, WTI crude for August delivery dropped only 25 cents to $68.33 a barrel, after gaining earlier. The contract jumped 4.6 percent to $68.58 on Friday. Total volume traded was more than double the 100-day average.

The differing reaction narrowed Brent’s premium to $5.83 from more than $10 last week.

Futures rose 1.8 percent to 467.3 yuan a barrel on the Shanghai International Energy Exchange, after edging down 0.2 percent on Friday. […]

Bloomberg.com —  China and the European Union vowed to oppose trade protectionism and unilateralism, saying those actions could push the world into recession in an apparent rebuke to the U.S.

Vice Premier Liu He — President Xi Jinping’s top economic adviser — said China and the EU had agreed to defend the multilateral trading system, following economic talks Monday in Beijing. The comments, made at a press briefing with European Commission Vice President Jyrki Katainen, come as both sides prepared to face off against U.S. President Donald Trump’s tariff threats.

The talks were taking place at a time when “unilateralism is on the rise and trade tensions have appeared in major economies,” Liu said. “China and the EU firmly oppose trade unilateralism and protectionism and think these actions may bring recession and turbulence to the global economy.”

Both China and the EU have recently come under pressure from Trump on trade. The bloc imposed tariffs on $3.3 billion of American products Friday in response to U.S. barriers on imports of aluminum and steel, triggering threats of further tariffs on European cars from Trump.

Later this week, the U.S. Treasury Department is expected to release fresh rules on Chinese investment in technology companies, Bloomberg reported on Monday, putting additional pressure on China.

The U.S. is due to impose tariffs on $34 billion of Chinese imports from July 6, and Trump has threatened to impose levies on another $200 billion of Chinese goods. If that threat is realized, it could cut as much as half a percentage point off China’s economic growth, and also hit the American economy, economists have said.

Trump argues the global trading system is rigged against the world’s largest economy and has pushed heavily against what he sees as the unfair trade imbalance with China, the biggest exporting nation. […]

Bloomberg.com — Some White House officials are trying to restart talks with China to avoid a trade war before U.S. tariffs on Chinese products take effect July 6, three people familiar with the plans said, setting up a battle with others in the administration who favor a harder line.

Staff of the National Economic Council have contacted former U.S. government officials and China experts in recent days to gauge chances for high-level talks in the next two weeks, the people said on condition of anonymity to discuss the inquiries. One idea NEC staff floated was inviting Chinese Vice President Wang Qishan before the tariff deadline, they said.

The outreach signals a willingness by some U.S. officials to seek a truce before $34 billion in Chinese products are hit with tariffs rather than trigger a trade war between the world’s two largest economies. Still, the chances of such negotiations happening in the near term are slim as long as opponents inside the administration favor penalizing Beijing. President Donald Trump has shown no signs of backing down. […]

Bloomberg.com — Asian stocks pared earlier losses to trade mixed amid ongoing concern global trade restrictions will curb growth. Oil prices rose as OPEC moved closer to a deal on output.

Declines in Japanese and Hong Kong equities were offset by advances in their Chinese and Korean counterparts. U.S. futures pointed to gains after the S&P 500 Index closed lower and the Dow Jones Industrial Average posted its eighth straight drop. The dollar steadied with Treasuries. West Texas oil rose above $66 as OPEC and its allies reached a preliminary agreement despite strong opposition from Iran to boost production.

A quick escalation of tension between the U.S. and China this month is threatening the growth outlook just as the Federal Reserve signals a faster pace of policy tightening. While many are hoping for a truce before Chinese goods get hit with tariffs, President Donald Trump has shown no signs of backing down.

“People want to be defensive,” Hao Hong, chief strategist with Bocom International Holdings Co., told Bloomberg TV. “Even if you catch a temporary bottom and there’s a technical rebound, it’s not enough to produce a sustainable rally.”

Elsewhere, the pound extended gains triggered by the BOE’s chief economist vote for an immediate rate hike. Italian assets were hit after two prominent critics of the European Union were given key posts in parliament.

Investing.com – The number of Americans who first applied for unemployment benefits last week fell by 3 thousand and amounted to 218 thousand, according to a report of the US Labor Department.

The indicator for the previous week was revised from 218 to 221 thousand. Experts  expected  the increase from the previously announced level of 2 thousand, to 220 thousand on average.

The indicator remains at an extremely low level: its value is below 300 thousand, indicating an active growth of the labor market.

The average number of applications for the last four weeks, less volatile, fell to 221 thousand from 225 thousand.

Meanwhile, the number of continuing to receive unemployment benefits for the Americans for the week ended June 9 jumped by 22 thousand – to 1.723 million from a revised 1.701 million in the previous week.

Analysts predicted an increase of 13 thousand from previously announced 1.697 million, to 1.71 million.

Investing.com – The Bank of England, as a result of the June meeting, left the benchmark interest rate at 0.5% per annum, the Central Bank’s Monetary Policy Committee (MPC) said in a statement. The British Central Bank has kept the rate at this level since November 2017, when it was raised for the first time in a decade.

The Bank of England also retained the volume of purchase of corporate bonds at the level of 10 billion pounds and the volume of the program of buying government bonds at the level of 435 billion pounds sterling ($ 570.2 billion).

The bank’s decisions coincided with market expectations.

Bloomberg.com — Most Asian stocks declined on Thursday as concern simmered about an escalation of trade tensions between the U.S. and China, and Goldman Sachs Group Inc. turned cautious on the region’s equities. The dollar strengthened.

Among the biggest declines were benchmarks in Malaysia, the Philippines and Thailand, which fell at least 1 percent. Japan’s shares were little changed. Australian stocks by contrast reached an eight-year high as banks drove a continuing rally. Indonesia’s rupiah dropped more than 1 percent to pace declines in emerging-market currencies. Oil slipped below $66 a barrel ahead of a crucial OPEC meeting that will decide on output.

“At the moment we just want to be a little bit cautious,” Colin Graham, chief investment officer of multi-asset solutions at Eastspring Investments, said on Bloomberg Television. “Overall Goldilocks is still alive and it’s going to be fine this year — risk assets are still going to outperform safe-haven assets — but we are going to see more choppy returns.”

Worries about fresh volatility stemming from developments on trade linger after a tumultuous start to the week triggered by a ratcheting up of skirmishes by U.S. President Donald Trump with China. Goldman Sachs, a long-time bull, has pared its 12-month target for an index of Asian stocks excluding Japan, citing escalating trade tension between the U.S. and China just as global growth is slowing with tighter U.S. monetary policy and a stronger greenback. Meanwhile, Morgan Stanley said Hong Kong’s equity sell-off has further to run and slashed its 12-month for the Hang Seng Index.

Elsewhere, New Zealand’s dollar fell to its weakest in six months after data showed first-quarter growth slowed, bolstering the case for the central bank to keep rates at a historic low. Philippine stocks tumbled as the nation’s finance chief played down concerns about inflation, a falling currency and a trade deficit.

Futures on the Nasdaq Composite Index climbed after the underlying index ended at an all-time high, buoyed by a rally in Facebook Inc. Exchange-traded funds tracking equities in Argentina and Saudi Arabia gained after MSCI Inc. upgraded the nations to emerging-market status.

Bloomberg.com — The Bank of England is set to wait a little longer before following up on last year’s interest-rate hike after a run of mixed economic data.

All of the 38 analysts surveyed by Bloomberg expect the Monetary Policy Committee to vote in favor of keeping rates unchanged on Thursday. A 7-2 split is seen as the mostly likely outcome, with Ian McCafferty and Michael Saunders continuing their push for an immediate increase. The decision will be published at noon, alongside a statement and minutes of the deliberations.

Following officials’ decision to keep rates at 0.5 percent in May, a month once seen as almost certain for a hike, BOE Governor Mark Carney said that he and the majority “thought it made sense to take a bit of time” to gauge the economy after the first-quarter weakness. Markets will be hoping the June minutes shed further light on that assessment after figures that have provided no clear direction. […]