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Investing.com - Here are the top five things you need to know in financial markets on Monday, August 19:
1. U.S.-China trade talks ‘positive’
President Donald Trump tweeted over the weekend that the U.S. was “doing very well with China, and talking”, although he repeated that he was still not ready to do a deal.
Trump’s top economic adviser, Larry Kudlow, said earlier on Sunday that recent phone discussions between Washington and Beijing had been “positive” and indicated that there would be more teleconferences planned between negotiators over the next week to 10 days.
Kudlow said in an interview with “Fox News Sunday” that if those conversations went well, then a “substantive renewal of negotiations” could begin with Chinese negotiators visiting the U.S. to continue talks.
2. Stocks higher, bonds sell off as risk appetite returns
Global stocks moved higher on Monday and bonds sold off as market sentiment improved on hopes for trade talks and further signs of policy easing.
Asian stocks were sharply higher with Chinese shares leading the rally after the country’s central bank announced a long-awaited reform to interest rates.
European bourses shared in the rally after German Finance Minister Olaf Scholz said Sunday that the euro zone’s largest economy could provide €50 billion($55 billion) of fiscal stimulus in the event of the need to combat a recession. Scholz suggested that the potential move would likely come after the European Central Bank restarted quantitative easing.
The improvement in equities saw an opposite move in European sovereign debt yields, which move inversely to prices, as they pulled away from record lows.
U.S. futures pointed to a higher open, while yields on long-term U.S. Treasuries moved sharply higher. The yield curve inversion unwound further with the yield on the 10-year Treasury note pulling further above that of the 2-year.
3. Apple talked to Trump over tariffs, U.S. decision on Huawei on tap
Trump said Sunday that he had talked with Apple's (NASDAQ:AAPL) Chief Executive Tim Cook about the impact of U.S. tariffs.
According to the president, Cook “made a good case” that tariffs could hurt the company, especially considering that its South Korean rival Samsung (KS:005930) was not subjected to those same tariffs, and was “thinking about it”.
Markets were also awaiting a decision expected to arrive Monday over whether the government will allow Huawei Technologies to buy supplies from U.S. firms.
Several media outlets reported that the U.S. Commerce Department will grant a “temporary general license” that will allow business to continue for another 90 days.
That was despite remarks from Trump over the weekend that he didn’t want the U.S. to do business with Huawei for national security reasons.
4. China announces new interest-rate reform
The People’s Bank of China announced over the weekend that it will make the loan prime rate, which banks offer their preferred clients, the new benchmark for pricing loans.
The long-awaited reform is a move to help lower borrowing costs for companies that have been experiencing record defaults this year.
Analysts said the change aims to increase liquidity available to smaller businesses as an alternative to lowering the policy rate when they deem would be ineffective.
5. Oil rises after attack on Saudi oilfield
Oil traded higher after a drone attack on an oil facility in Saudi Arabia, while positive remarks on Sino-U.S. trade talks also supported sentiment.
Saturday’s drone attack was attributed to Yemeni rebels and took place on an oilfield in eastern Saudi Arabia that produces approximately 1 million barrels per day.
Although the attack caused a fire at the facility, Saudi’s energy minister reportedly said that the kingdom’s production was unaffected.
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-- Reuters contributed to this report.
