From Marc to Market:
Overview: There are two big themes in the capital markets today. The first is the ongoing push of the Chinese state into what was the private sector. Today's actions involve breaking Ant's lending arms into separate entities, with the state taking a stake. This weighed on Chinese shares and Hong Kong, where many are listed. On the other hand, Japanese markets extended their recent gains. The Nikkei, for example, has fallen once in the past 10 sessions. South Korea and Australia's markets rose, but the other major bourses in the region fell. On the other hand, there is, outside of Asia, an embracement of risk. Europe's Dow Jones Stoxx 600 is snapping a three-day slide, while the US S&P 500 and Dow are poised to end their five-day drop and the Nasdaq, a three-day fall. Benchmark 10-year yields are narrowly mixed, leaving the US yield near 1.33%. In the foreign exchange markets, the Norwegian krone and Canadian dollar bid, while the sterling, the euro, and Swiss franc weaker. The yen is also sporting a soft profile. Among the emerging currencies, the liquid accessible currencies, led by the Russian ruble, Turkish lira, and South African rand, are the strongest. Of note, the dollar had finished last week at its lowest level against the Chinese yuan in nearly three months. The greenback recovered and is back above the lower end of the range found around CNY6.45. Gold is steady in the lower part of last week's range. November WTI is testing the $70-level, which it has not closed above since the end of July. Iron ore prices are heavy, with the leading Chinese futures contract off for the 10th session in the past 11, during which time it has fallen almost 20%. Copper is up for a third session and is at its best level since early August. Aluminum is trading above $3000 for the first time in 13 years. The CRB Index eked out a small gain last week to extend its advance for the third consecutive week.
Asia Pacific
Reports indicate that last week's call between Xi and Biden was instigated by the US and frustrated by Beijing's unwillingness to engage US officials in a substantive fashion. China rejects the US approach of de-linking issues, which identifies some areas of cooperation and other areas of intensive competition. Instead, Beijing insists that there must be respect for each other's core concerns. Nevertheless, within 24-hours of the 90-minute call, the Biden administration let two things be known. First, a new investigation into Chinese trade practices, particularly how its subsidies harm the US economy, is being contemplated. It may indeed be launched, but it seems unrealistic to think that is the pressure that will make China capitulate. Second, reports indicate that the US may allow the representative office in Washington to include the name Taiwan and not just Taipei. No doubt Taiwan will approve of it, but to what end? What is achieved? Will Beijing stop harassing Taiwan by flying stories of fighter and jet planes into its airspace, or is it more likely that the fear of gradually losing Taiwan encourage Beijing to strike back?
On the other hand, a couple of other developments point in the other direction. Consider that when Fitch upgraded Taiwan's debt at the end of last week, it made reference to Taiwan and China in its press release. It raised eyebrows immediately. Fitch dismissed it as an administrative issue. Others linked it to last year's decision by Beijing to grant Fitch approval as an independent credit agency. Taiwan, of course, expressed its regret, though it likely appreciated the upgrade at AA. Later this year, Taiwan is likely to lose an ally. Honduras is one of the few countries that formally recognize Taiwan. The opposition is pulling ahead in the polls, and former president Zelaya says that if he wins, he will re-orient its policy toward China....
....MUCH MORE
