Date: December 12, 2018
Fed Bond Losses, China Trade Damage, RBI Newcomer: Eco Day
Good morning Americas. Here’s the latest news and analysis from Bloomberg Economics to help get your day started: Federal Reserve is piling up unrealized losses on its $4.1 trillion bond portfolio, raising questions about its finances at a politically dicey moment for the independent central bank. President Donald Trump has urged the Federal Reserve not to proceed with an expected interest-rate increase when it meets next week, continuing his public campaign against further hikes. That’s not the first time Trump has made his feelings about Fed Chairman Powell known. The damage to China’s economy from the trade war with the U.S. can’t be immediately made good even in the case of a resolution, Citigroup economists say. It’s good news for Vietnam though. In the race to lure companies looking for alternative manufacturing sites, it wields a slew of advantages over its rivals. In a big week for the European Central Bank, the biggest prize for bond investors when it makes its final monetary policy decision of the year might be a clearer plan for its 2.6 trillion-euro asset-purchase portfolio. President Recep Tayyip Erdogan’s silence on interest rates is doing little to soothe market worry that Turkey’s central bank could act too soon to loosen policy. European Union leaders are set to mandate the design of a controversial budget for the euro area as part of a plan to shore up the common currency
European Stocks Rebound From 2-Year Low as Miners to Tech Rise
European equities recovered, rising from the lowest level in more than two years, as miners and tech shares led the advance. The Stoxx Europe 600 Index climbed 0.9 percent. The gauge is still poised for the worst annual loss since the 2008 financial crisis, down 12% year-to-date. Nestle SA jumped 1.1 percent and Sanofi climbed 1.9 percent. Traders’ optimism returned after the news that Chinese Vice Premier Liu He discussed the timetable for trade talks with Treasury Secretary Steven Mnuchin by phone, though investors also have an eye on the continuing spat over Canada’s arrest of the Huawei Technologies Co. chief financial officer at the U.S.’s behest. All eyes are also on the Brexit developments after Prime Minister Theresa May on Monday postponed the vote on the divorce deal. “News that U.S. and Chinese trade officials spoke overnight to discuss getting trade talks back on track helped calm investors’ fears,” said David Madden, a market analyst at CMC Markets UK.
China Move to Cut Duties on U.S. Imports Lifts Auto Stocks
Progress toward easing the steep tariffs China imposed on U.S. vehicle imports this year lifted carmaker stocks across the globe, as investors wagered on a thawing of tensions that have damaged the world’s biggest automotive market. Toyota Motor Corp. and Hyundai Motor Co. tracked earlier gains for Daimler AG, General Motors Co. and Tesla Inc. after Bloomberg News reported that a proposal to eliminate the 25 percent surcharge slapped onto U.S.-made cars this year has been submitted to China’s cabinet. The plan would be reviewed in coming days, people familiar with the matter said. The levy forms the backbone of China’s response to a trade war instigated by President Donald Trump as he seeks to reset trade relations and spur manufacturing in the U.S. Car sales in China have fallen for six straight months after decades of almost uninterrupted growth, and while there are other factors, the tit-for-tat jabs between the world’s biggest economies have played a role. The tension had escalated in recent days with the arrest of Huawei Technologies Co. Chief Financial Officer Meng Wanzhou over alleged sanctions violations. A Canadian court released Meng on bail Tuesday, pending further proceedings on U.S. efforts to extradite her. Trump separately told Reuters that he would consider intervening in the Huawei case if it served national security and helped with a China trade deal.