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The start of 2018 has been so good for markets, strategists are already warning about complacency. Meanwhile, China suffers another bout of fake economic data, and cryptocurrencies slide as regulatory and demand concerns linger. Here are some of the things people in markets are talking about today.
Sounding the Complacency Alarm
Two of the biggest names in financial markets are sounding warnings against complacency in the global economic outlook. After strong data and multiple stock-market records in the first week of 2018, Citigroup Inc. and Pacific Investment Management Co. told clients over the past few days that there are still reasons to be worried. While both agree there are causes for optimism, they cite geopolitical factors, a removal of central bank stimulus and the risk of an inflation overshoot as possible catalysts for an end to the current economic expansion and market exuberance. Investors are showing few signs of unease with global stocks at record highs and volatility measures still subdued.
North and South Korea Head for Talks
South Korean officials face a delicate task at 10a.m. Seoul time today, when they meet their North Korean counterparts for the first time in more than two years. The meeting at a village on their shared border will focus on North Korea's participation at next month's Winter Olympics in the South Korean mountain resort of Pyeongchang. But there's much more at stake. After a tumultuous year in which Kim Jong Un's regime accelerated its nuclear weapons program and U.S. President Donald Trump threatened to strike back with “fire and fury,” it's an opportunity to ease tensions — and possibly open the door to peace talks.
Crypto Rout
Bitcoin slumped Monday, dragging down smaller rivals such as ether and litecoin, as concerns that regulators will tighten their grip on the market weigh on the the world's largest cryptocurrency. Regulators in China and South Korea are increasing oversight on cryptocurrency trading and mining, while the U.S. Securities and Exchange Commission late last year started cracking down on some digital token sales, known as ICOs. These actions are spurring speculation demand in the biggest markets for digital assets may wane. The rout in bitcoin is part of a broader selloff in the cryptocurrency realm, with all of the top 10 by market cap falling, and most tumbling by at least 10 percent, according to Coinmarketcap.com.
China Bond Buyer's Remorse
China's first sovereign dollar bond in more than a decade has done poorly for investors who scrambled to get a piece of the rare offering amid overwhelming demand. The tight pricing of the bonds, lauded by China's finance ministry, has had a lot to do with it, according to analysts. The $2 billion securities sold in late October handed investors a 0.73 percent loss in the last two months of 2017, one of the few Asian nations that saw their government bonds generate negative returns during the period. In a bid to serve as a benchmark for the nation's surging dollar-denominated corporate bond market, China's government priced its debentures at a lower premium than that of South Korea, which is rated two steps higher by S&P Global Ratings. The effect proved short-lived as spreads on state-owned company bonds, which compressed leading up to the offering, have reversed the gains since the sovereign bonds were sold.
Coming Up…
Asian equities are poised to open in the green after U.S. stocks turned higher in afternoon trading. Technology shares once again bolstered major indexes, as investors continue to price in the impact of tax cuts before corporate earnings start later in the week. It's a light day for data out of Asia, with Japan November labor cash earnings the standout. Bloomberg Economics expects a 0.8% year-on-year rise, up from 0.2% in October.
What we've been reading
This is what caught our eye over the last 24 hours.
- This is Australia's only tech unicorn.
- Airbus offers China a production role on the A380.
- France's Macron calls for China-EU Relationship to enter 21st Century.
- Trump is close to picking a Fed vice chair, sources say.
- Inside the semiconductor industry's meltdown.
- London beats New York among foreign investors in real estate.
- Forget the presidency, Oprah would be a terrific head of state.
--With assistance from Camila Russo David Goodman Lianting Tu and David Tweed
To contact the editor responsible for this story: Boris Korby at bkorby1@bloomberg.net.
©2018 Bloomberg L.P.
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