Investing.com - Here are the top five things you need to know in financial markets on Monday, August 12:
1. U.S. futures turn lower after Hong Kong unrest hits airport
U.S. futures reversed gains after China lashed out at protests in Hong Kong, raising fears that it will use force to restore order.
Hong Kong’s international airport cancelled all flights for the rest of Monday after protesters flooded the building, hours after China had warned airline Cathay Pacific to bar all staff who had taken part in the protests from working on flights to the Chinese mainland.
China's Hong Kong and Macau affairs office based in Beijing insisted that Hong Kong is at a “critical juncture” after two months of anti-government street protests and insisted that the violence there must stop, according to a Reuters report.
Increasingly violent protests in the Asian financial hub have now entered their tenth week in one of the most serious challenges to Communist Party rule since the Tiananmen Square massacre in 1989.
2. Yuan drifts lower
The People’s Bank of China set the official midpoint reference for the yuan at 7.0211 per dollar on Monday, weaker than the level set last Friday but stronger than 7.0331 expected by analysts according to Reuters.
Markets have been closely watching the exchange rate after the Chinese currency depreciated last week past the psychological level of 7 per dollar for the first time since 2008.
The U.S. Treasury responded to the move by labeling China a currency manipulator, amid rising trade tensions between Washington and Beijing.
3. U.S. 10-year Treasury yield drops back below 1.7%
Bond yields fell further as demand for haven assets rose in response to developments in Hong Kong and Europe.
The yield on the U.S. 10-year Treasury slid back below 1.7%. That's still a far cry from the 1.60% seen last week, its lowest level since October 2016.
The 10-year yield remains below the 2% on the 3-month note, a phenomenon referred to as an inverted yield curve which some economists consider to be an early indicator of recession.
Goldman Sachs said on Sunday that fears of the U.S.-China trade war leading to a recession are increasing.
4. Italian leaders to meet as Salvini denies plans to leave euro
The leader of Italy’s right-wing Lega party Matteo Salvini, said he was not pursuing any plans to leave the euro, in an effort to soothe markets after he pulled the plug on his own governing coalition and called for a snap election last week.
Salvini’s party has filed a no-confidence motion the he hopes will lead to elections and establish him as Italy’s new leader. His party currently enjoys a clear lead in national opinion polls.
Salvini hopes to push forward the motion as early as this week, although opposition parties appear to hold a preference for Aug. 19-20.
Italian political party leaders in the Senate are expected to meet Monday to set the timetable.
5. Saudi Aramco picks up 20% of India’s Reliance
Saudi Aramco is purchasing a 20% stake, worth an estimated $15 billion, in the oil and chemical business of India’s Reliance Industries, a move that will strengthen its position in Asia's second-biggest market for oil.
The announcement comes as Aramco reported a drop of more than 10% in first-half net earnings to $46.9 billion which it attributed to lower oil prices.
Aramco will also hold its first ever earnings call at 9:00 AM ET (13:00 GMT), only days after reviving talk of an IPO that was shelved last year due to differences with potential investors over price and governance practices.
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-- Reuters contributed to this report.