China “broke” trade negotiations (and stock-market momentum)
That’s the gist of what President Trump told a cheering crowd in Florida — China breached its early promises during monthslong negotiations and that’s why they’ll be paying higher tariffs this Friday. The president’s statements come as the country’s chief negotiator Vice Premier Liu He and his team head to Washington for two-day talks, where the outcome is uncertain.
President Trump on China: "By the way, you see the tariffs we're doing? Because they broke the deal! So they're flying in, the vice premier tomorrow is flying, good man, but they broke the deal. They can't do that. So, they'll be paying." pic.twitter.com/8uhKZHOeWE
— The Hill (@thehill) May 9, 2019
Global equity markets aren’t loving the latest headlines, along with Beijing’s own retaliatory threats, so expect that risk-off mood we’ve been seeing all week to linger longer.
Opinion: The U.S. stock market’s uptrend has been shattered, says this technical analysis
We’re switching gears this morning with our call of the day, from Steve Eisman, a hedge-fund trader who gained prominence for his successful mortgage bets during the 2008 financial crisis. He’s back with more advice in a Bloomberg interview where he pounds the table over corporate debt, which has been a popular subject lately.
In the interview, Eisman says the center of pain for the next U.S. recession will trigger “massive losses” for high-yield or junk bonds, and those rated triple-BBB corporate bonds — just one step higher from those low-grade bonds.
Eisman says the problem is there isn’t enough liquidity — that is, how fast an investor can sell that bond and at a decent price. Traditionally, high-yield bonds tend to be less liquid because they are a riskier securities, with fewer investors willing to take on that risk.
The comments are timely as the Federal Reserve’s stability sheet this week highlighted an increase in risky new loans doled out to indebted companies in the first quarter — notably, those referred to as leveraged loans— as credit standards have slipped. The Fed characterized the financial sector as “resilient,” but noted investors ”continued to exhibit high appetite for risk.”
Still, Fed Vice Chair for Supervision Randal Quarles, said on the heels of that report that media hype of leverage-loan risk makes it seem like “the earth must be getting hit by an asteroid.” In other words, nothing to see here.
The tweet
The Chinese delegation is at the airport and will take off soon. Some ask why bother to go to the US for talks given what had happened?This is also a question for the US side, why still bother to invite the Chinese delegation? I want to emphasize 'invitation'.
— Hu Xijin 胡锡进 (@HuXijin_GT) May 9, 2019
That tweet is from Hu Xijin, the editor in chief of Chinese tabloid Global Times, which is known for its pro-government slant. In short, the editor says despite those trade tensions, Chinese delegations are coming because they were invited.
The market
Dow YMM9, -0.79% S&P 500 ESM9, -0.88% and Nasdaq NQM9, -1.13% futures are lower. Wednesday’s action saw stocks slip toward the close, with the Dow clinging to a gain, but the Nasdaq COMP, -0.26% and S&P 500 SPX, -0.16% logged a third-straight loss. Read Market Snapshot for more
Haven plays are getting the love with the yield on the 10-year Treasury note TMUBMUSD10Y, -1.69% slipping to 2.447% and gold US:GCU8 up. Bond prices rise as yields fall. The dollar DXY, -0.02% meanwhile, was off 0.2% against the yen USDJPY, -0.30% while the yuan USDCNH, +0.7153% hit a four-month low. Crude US:CLU8 is down.
Europe stocks SXXP, -0.96% are lower, while in Asia, the Hang Seng HSI, -2.39% dropped over 2% and China stocks SHCOMP, -1.48% fell 1.5%.
Opinion: Greek bonds now yield less than Treasurys, and that’s as irrational as it was in 2007
The chart
Bitcoin BTCUSD, +1.17% has busted past $6,000 for the first time since November. And its market cap is now atop $100 billion, with $1.45 billion of that entering that market in the last 24 hours, says Coindesk.com.
Ethereum ETHEUR, -0.57% and Bitcoin Cash BCHUSD, -0.57% also were getting some nice bumps.
The buzz
North Korea fired an unidentified projectile from the western part of the country, says neighbor South Korea. It’s the second such weapons launch over the past five days.
Uber UBER, +0.00% will price shares for its coming IPO on Thursday, before trading that’s set to begin Friday. Thousands of the ride-sharing app’s drivers went on strike Wednesday, but some say labor actions such as those are becoming a relic of the past.
Disney DIS, +1.16% is slipping, even as the media giant beat earnings forecasts, though revenue slipped ahead of an “Avengers: Endgame” windfall. And Roku ROKU, +0.79% shares are getting a bigger bump after the streaming-media group posted a hefty revenue beat and bullish forecast.
Stamps.com STMP, -0.31% shares are cratering after the internet mailing and shipping services group cut full-year guidance. Those shares took a bit hit earlier this year after saying its exclusive deal with the U.S. Postal Service will end.
On Thursday’s earnings calendar we’ve got a few highlights — Duke Energy DUK, -1.64% health care group Cardinal Health CAH, +1.57% and then cloud storage group Dropbox DBX, +0.34% action camera maker GoPro GPRO, +2.26% directory service Yelp YELP, +1.65% and retailer L Brands after the close.
Meanwhile, Redfin, a U.S. national real-estate brokerage, is working on a new plan that will save commission fees for buyers and sellers.
The economy
It’s a busy economic docket, with Fed Chairman Jerome Powell due to make comments at a conference at 8:30 a.m. Eastern, with Chicago Fed President Charles Evans speaking later at the same event. We’ll hear from Atlanta Fed President Raphael Bostic at a separate event at 10:45 a.m. Eastern.
And all at 8:30 a.m. Eastern — weekly jobless claims, the trade deficit and producer prices, followed by wholesale inventories later.
Random reads
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Magic mushrooms are almost legal in Denver
The “heartbreaking row” surrounding new Royal baby Archie’s name.
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