Morning Report – Wednesday 27th May
Hong Kong activists are blocking roads ahead of what potentially could be the largest protests seen in recent times against China’s plans for national security laws. Rallies will be held near government, where members plan to discuss a bill criminalising disrespect toward China’s national anthem. Pro-democracy figure Martin Lee said it’s part of a broader attempt to impose more restrictions, and called it “the rape of Hong Kong.” Donald Trump doubts the city can retain its status as a financial hub if the laws take effect, the White House said.
Trump promised he’d take “very interesting” action on China by the end of the week as Washington considers sanctions on officials, businesses and financial institutions over Hong Kong. The Treasury Department could put controls on transactions and freeze assets. Trump said he’d start by looking “very strongly” at a separate bill requiring sanctions on Beijing officials responsible for the repression of Uighurs.
U.S. and European stock futures gained with Asian markets as prospects for more global stimulus, including a huge Japanese package, overshadowed tensions between Washington and Beijing. Hong Kong and Chinese shares reversed the trend and the yuan tumbled amid speculation China is allowing depreciation. Treasuries steadied after overnight losses. Oil wavered on signs Russia was planning to increase supply from July.
New Zealand has no desire for a common currency with Australia even as the two nations seek to forge closer ties in the post-coronavirus world. Both cited Europe’s experience with a common currency, the euro, as an example of why New Zealand and Australia should not pursue one.
The British government said this morning that it was time to move on after Prime Minister Boris Johnson’s senior adviser provoked outrage and widespread scorn by making a 400 km (250 mile) road trip during the coronavirus lockdown. The fortunes of millions of workers are hanging in the balance as Rishi Sunak weighs up whether to axe a crucial self-employment support programme and separately prepares to block new furlough applications. The economy is on track for a short V-shaped recession following early signs that spending has jumped by more than expected, the Bank of England’s chief economist has said.
The European commission presents its proposal for the EU recovery fund to parliament today. It is expected to build on German/French EUR 500bln fund idea, but there’s a risk countries such as Austria, Denmark, Netherlands and Sweden want loans, not grants. These countries contribute more to the EU budget so it will be interesting to see how this plays out. The German constitutional court’s ruling against the European Central Bank’s bond-buying scheme will not directly affect the ECB and will not lead to the Bundesbank having to exit the scheme, ECB Executive Board member Isabel Schnabel said.
The dollar edged higher on Wednesday as worries about the U.S. response to China’s proposed security law and renewed protests in Hong Kong supported safe-haven demand for the greenback. Some investors are betting on a resumption of business activity following the crippling coronavirus pandemic that brought the global economy to a standstill, but others worry the threat of U.S. sanctions against China for its treatment of Hong Kong could easily worsen risk sentiment yet again.
Main Economic Data/Central Banks/Government (All Times BST)
- 6:30 a.m.: France May business/consumer confidence
- 8:30 a.m.: ECB’s Lagarde participates in #AskECB event
- 12:00 p.m.: ECB’s Enria speaks at IIF virtual conference
Earnings include British Land, Britvic, Elior Group, Pexip