Conflicting signals in stock and bond markets suggest that investors are having a hard time anticipating where the US-Chinese trade conflict will take the US economy. Bond yields and stocks typically fall in parallel when investors believe the economy is headed into a downturn, yet bond yields have been falling while stock prices have been rising.
Regulators must learn more about how nonbanks would respond to a financial crisis, particularly their capacity and willingness to absorb credit losses, says Agustin Carstens, head of the Bank for International Settlements. "If an event triggers a reassessment of risks, these investors could join a selling spree and amplify destabilizing market dynamics," Carstens says.
The pace of US retail sales picked up in May, suggesting that fears of a sharp economic downturn this year might be overblown. The Commerce Department reported that retail sales rose 0.5% last month and upgraded April's figure to a 0.3% gain from a 0.2% decline.
The US has requested that a World Trade Organization investigation of complaints about China's intellectual property practices be suspended until Dec. 31. The US and China have agreed to suspend action on the dispute after China revised or repealed rules the US had complained about, a source says.
Distributed ledger technology can enhance the existing settlement system but won't entirely replace settlement infrastructure "without imposing the very costs it was designed to reduce," according to a Greenwich Associates whitepaper. "The technology is evolutionary, not revolutionary, and attempting to replace the clearing infrastructure with this technology is to carry the system not into the future, but into the past," said Greenwich senior analyst Ken Monahan.
Deutsche Bank plans to place as much as €50 billion in assets into a "bad bank" and might make major cuts to equity and rates trading, sources say.
A 0.2% EU financial-transaction tax could be agreed upon this autumn and be implemented in 2021, German Finance Minister Olaf Scholz says, with backing from the European Commission. However, only 10 countries have shown interest in the tax, and other EU officials say further work is needed on the plan.
The Bank of England has written to the chief executives of challenger banks in the UK warning of shortcomings in their risk-management practices following a confidential stress test.
Legislation that would allow extradition to China from Hong Kong could pose legal risk to international firms' employees and could threaten Hong Kong's status as a global financial hub, experts say. "The outcome could be a drain of multinationals to other cities in Asia, with Singapore the most likely beneficiary," says Mark Williams, chief Asia economist at Capital Economics.