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Washington criticizes Beijing over pace of economic liberalization, short sellers fuel China bond rout, and OPEC in agreement on oil output. Here are some of the things people in markets are talking about.
Washington Rebuke; Tillerson on the Hot Seat
The Trump administration called on other major economies to find a united response to China's slowing embrace of market principles as the nation's role in the global economy continues to rise. The rebuke, which was unusually strong, comes as the U.S. seeks help from Beijing in corralling North Korea's nuclear-weapons program. The U.S. also joined the European Union in rejecting China's claim that, under the terms of its accession to the World Trade Organization, it should have graduated last year to market-economy status, which would offer greater protection from anti-dumping duties. Separately, the White House is weighing a plan to replace Secretary of State Rex Tillerson with CIA Director Mike Pompeo, three administration officials said, amid frustration with the top diplomat's slow pace of hiring and repeated policy disagreements with the President, including how hard to seek a diplomatic solution with North Korea.
Blame the Short Sellers
China's biggest bond selloff in four years might be getting worse because of short sellers. There isn't an official measure of short sales, but analysts are pointing to a rise in bond lending as a sign that bearish bets are on the rise. A record 1.82 trillion yuan ($274 billion) of notes has been lent out this year, 18 percent more than the total for all of last year. Short sellers profit from falling bond values by selling borrowed notes and buying them back after prices decline. A rise in inflation and an official attempt to pare back excessive borrowing has caused the debt market to struggle. The benchmark 10-year sovereign yield is set for the biggest annual increase in four years. While Chinese regulators have been known to clamp down on bearish wagers in the stock and currency markets, they haven't taken any major measures to curb short-selling of bonds.
FANGs Make a Comeback
The pullback didn't last very long for tech stocks. Thanks to a helping hand from Senator John McCain, whose backing of the Senate tax bill fueled a rally in U.S. equities across the board Thursday, the biggest technology stocks rebounded from their worst selloff in more than a year. The Dow Jones Industrial Average extended its climb past 24,000 after the statement of support from the Arizona Republican, while the S&P 500 was set for its longest monthly winning streak since 2007. Oil whipsawed traders after OPEC and Russia agreed to extend production cuts. The Stoxx Europe 600 slipped while the euro and pound strengthened as Brexit negotiators moved closer to a divorce agreement. Treasury yields rose, capping the least turbulent month for 10-year notes in almost four decades.
Speaking of Oil
Crude contracts fluctuated throughout the day as traders digested news that OPEC and its partners, including Russia, came together to extend oil-production cuts through the end of next year, with Libya and Nigeria included for the first time. Iraq's Oil Minister confirmed the decision after a day of talks that took place in Vienna and reflected a rare consensus between members. At the meeting, all agreed that the market is moving in the right direction, but is not yet balanced. Russia was the most skeptical, but ended up supporting the deal which will result in countries accounting for more than half the world's oil supply restraining output for two years.
A Busy End of Week
Get ready for a slew of data releases to start December. Friday's highlights in Asia include CPI, trade and final third quarter GDP from South Korea, while CPI and capital spending data is due from Japan. There will be a a number of of manufacturing PMIs across Asia and Europe, and the U.S. ISM manufacturing indicator for November is forecast to weaken for a second month after spiking to a 13-year high in September. The U.S. day also brings some Fedspeak our way, with St. Louis Fed President James Bullard talking about the economic outlook at the Clinton Presidential Center in Little Rock, Arkansas, and Dallas Fed President Robert Kaplan due to address a Border Economic Development and Entrepreneurship Symposium in McAllen, Texas.
What we've been reading
This is what caught our eye over the last 24 hours.
- These people defined global business in 2017.
- Goldman CEO says it's too early for a bitcoin strategy.
- Musk's battery boast will be short-lived.
- India's economy bounces back.
- Russia is planning a bond sale as threat of sanctions nears.
- Former President Obama meets with Chinese leader Xi Jinping.
- Hedge fund manager that bet on Botox is now putting his money behind a competitor.
--With assistance from Garfield Clinton Reynolds
To contact the editor responsible for this story: Boris Korby at bkorby1@bloomberg.net.
©2017 Bloomberg L.P.
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