Futures Down Again, China Hits 4-year lows, Yuan Throttled, Treasuries Back Above 3.2%
US stock futures were down a bit but mostly subdued, while movement in Asia was a little wilder. China’ Shanghai Composite Index reached new 4 year lows today, down another 3% on the day as the Yuan (NYSEARCA:CYB) got perilously close to a 10 year low against the US Dollar. The 10Y US Treasury meanwhile has zoomed back up to yields of 3.21%, rising nearly 5 basis points in the space of 5 hours last night after market close. New highs would be at 3.262, about 5 basis points away. Given the highest deficit ever outside of recession or war of about $1.2 trillion for fiscal 2018 (which is how much the national debt has ballooned during the previous fiscal year including so-called “off-budget” spending), a further breakout in yields is going to expand the deficit ever further as borrowing costs continue to rise.
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Fed Minutes Point to at least 3 Rate Hikes Next Year
The effective federal funds rate will be a at least a full percentage higher than it is now by this time next year, says Bloomberg, basing the assumption on the newest Federal Reserve minutes release, released yesterday. Nothing in the minutes gave a precise number, but nothing in them sought to douse expectations of rate hikes either. The Fed may intend to raise rates 3 times next year, taking into account an assumed rate hike in December which would bring the effective rate up 1% by the end of 2019, but any number of developments could derail this, including a recession, inflation, or a rising dollar.
Has HIV Met its Match?
Gilead Sciences’ (NASDAQ:GILD) new pill against human immunodeficiency virus (HIV) has had an astounding effect on HIV infection rates in Australia according to a study to measure the effect of the drug. Truvada is an HIV antiviral that can be used as a prophylactic. New cases among gays and bisexual males fell to the lowest rate on record since the introduction of the drug. Truvada is a pre-exposure prophylaxis treatment, meaning that people at high risk of contracting the disease such as intravenous drug users and the sexually promiscuous can take the pill every day and have a 92% less chance of contracting the disease. Truvada is used as an HIV antiviral but can also be used to prevent the virus from establishing itself in a new host in the first place.
Exxon Turns to China Directly to Sidestep Tariffs
Exxon Mobil (NYSE:XOM) is trying to capitalize on China’s soaring liquefied natural gas demand through the use of a mainland storage outlet located in China. The gas is extracted in Papua New Guinea and Mozambique and then cooled and stored in its storage hub on the mainland to help spur Chinese demand for the fuel. This would bypass US tariffs against Chinese imports since Exxon would be providing the gas to the Chinese without exporting it first from the US itself. “China’s natural gas demand is rising really fast, with imports soaring well over 10 percent annually at the moment because of the government gasification program and due to fast rising industrial demand, including in petrochemicals,” an Exxon manager said, speaking on condition of anonymity.
Amid Record Deficits, Trump Administration Pats Own Back For Net Removal of 43 Regulations
It’s certainly spending like there’s no tomorrow, but one area where the Trump Administration has shrunk government is in its deregulation push that has so far cast aside 43 regulatory laws on net, eliminating 57 and adding 14. “We will have rules, regulations, and other standards which we need, we have to have. But we have knocked out tremendous numbers of unnecessary regulations,” which means 43, President Trump said yesterday. “One of the reasons the economy is so strong is that we’re not hampered by the ridiculous regulations.” New regulations introduced by Trump include rules on hurricane assistance for agricultural losses, bird flu indemnity claims, new regulations on mercury reporting and sewer overflow disclosures, though not figuratively.
The post Market Morning: China, Yuan Crushed; Fed Minutes Sparse, HIV Meets Match, Exxon Wants China appeared first on Market Exclusive.