By: Vincent Yuxin Lin
Asian stocks rallied towards the end of the week as the U.S. led by the Treasury Steven Mnuchin reached out to China for another round of trade talk. The market expects a positive outcome with the Hang Seng Index reaching 27,286.41, putting a stop to its 10-day losing streak and Nikkei 225 rose to over 7-month highs at 23,094.67. In Australia, the market also welcomed such positive news, along with the recovery of the Australian Dollar, S&P/ASX 200, led by the major banks, miners and CSL, increased to 6,165.30
Apple released its much-anticipated iPhones and Apple Watch this week. Despite the initial drop in its share price, stock value recovered and led the rally in the S&P 500, which ended higher at 2904.18.
China and Russia may be heading towards a closer alliance as the Eastern Economic Forum and Vostok 2018, the largest war games, kicked off this week. Alibaba, in the midst of this diplomatic tide struck a deal with Mail.ru, which would allow it to expand its operations in the Russian markets.
According to the Energy Information Administration, U.S. is likely to have overtaken Russia and Saudi Arabia as the world’s biggest oil producer early this year. Oil has risen about 6 per cent from the lows of August as threats to supply in Iran and Venezuela overshadowed risk to demand.
The Euro rose to a two-week high after weaker-than-expected U.S. inflation data continued to weigh on the dollar and as hopes rise for U.S.-China trade talks. The Aussie dollar gained more than 1 per cent this week as it benefited from the trade news and lower than expected unemployment rate.
In the emerging markets, China’s Yuan strengthened 126 basis points to 6.8362 against the U.S. dollar, Turkey Lira hiked after Turkey’s central bank raised its benchmark one-week repo rate by 625 basis point on Thursday.
Two-year Treasury yields on Thursday hit another decade high, and future trading shows investors anticipate two more Federal Reserve interest-rate hikes by year-end.
In China, listed nonfinancial companies had cash and equivalents to cover only 81 per cent of debt due in the coming year. In particular, the debt-laden property developers face a record $23 billion maturity wall in the first quarter of 2019, one company is even luring property buyers with brand new BMW Series 3.
Bitcoin slipped as SEC suspended trading in two securities linked to crypto. The market capitalisation of digital coins has tumbled about $640 billion from its January peak.
Housing market dangers are “especially acute” in Australia, Hong Kong, Canada and Sweden, Adam Slater – an Oxford lead Economist said, “Valuations are very elevated, there has been a lengthy housing boom, debt levels are high, and there is a significant share of floating rate debt.” Australian house prices are down almost 3 per cent in the year through August in major cities, in particular, Sydney’s housing market plummeted 5.6 per cent.
Sources: Reuters, Bloomberg, Financial Review