Mobocracy in Hong Kong
Reports of heightened unrest in Hong Kong plagued the Hang Seng, which fell 2.1%.
Hong Kong descent into mobocracy took another negative turn this morning. Hong Kong police issued a statement confirming that a protester was show and other officers in two different districts had drawn pistols from the holster as Hong Kong moves ever closer to total bedlam.
A primary catalyst for rising US-China risk is the Senate vote of the Hong Kong Bill, which is expected to pass. China has already said it will retaliate once the bill is passed. In the past, however, the U.S. and China have isolated issues like this from broader tariff negotiations but will this latest incident where a protester was shot by the police, on Veterans Day no less, will factor into the overall trade negotiations. It’s hard to imagine how it won’t.
But the big question now is how much more intense will this current wave of Hong Kong populism reach as video of the shooting circulates on social media.
Trade talk limbo
Trade talk headlines have been conspicuous by their absence, but Presidents Trumps speech on Tuesday at the New York Economic Club offers the perfect soapbox for the President to make a big political splash on both the US-China trade talks and section 232 auto investigation against the EU. The President has never been known to shy away from the spotlight, so keep eyes trained on this significant event.
BABA is no black sheep.
Chinese consumers collectively spent ~$10 bn in just under 30 minutes at Chinese e-commerce giant Alibaba's annual 'Singles' Day' shopping extravaganza on Nov. 11. (SCMP) The figure was already almost one-third of last year's final tally of US$30.8 bn. I know we tend to underestimate the purchasing power of the US consumer, but the strength of the Chinese consumer is staggering amid the US-China trade war suggesting they could be a pretty convincing self-correcting mechanism for what ills the Chinese economy.
Oil markets
Not a great deal is going on so far in Asia, but the skew has been mostly sellers.
Besides the trade talk limbo, if anything, Oil markets remain weighted down in Asia by a worst-case inflation scenario in the worlds second-largest oil importer. China’s PPI is pointing to a sputtering industrial engine while the rise in CPI suggest the PBoC will be reluctant to put cash into the system to pump air into the economy. However, this is just a short-term macro wobble as traders remain singularly focused on trade talk headlines. The Chinese consumer absolutely loves a good deal.
Gold market
A bit of a short-covering rally in the Asia session triggered by trade talk uncertainty which has seen fixed income bid through most of the morning session and lending support to gold prices. The market still has a selling bias towards $ 1475 /oz, but with geopolitical risk rising in Hong Kong, traders might be a bit less inclined drive prices lower. I think the gold markets bears are more willing to let the geopolitical dust settle for the time being and then re-engage shorts on the fist positive trade talk lean.