Good morning! Here’s what you need to know on Monday.
The People’s Bank of China (PBOC) has just set its USD/CNY fixing rate at a 6-year low. Again. The PBOC set the yuan’s mid-point at 6.7379, weaker than previous fix of 6.7157 and the last traded price of 6.7271 on Friday. The weakness in the yuan is a reflection of US dollar strength. The US dollar index — heavily influenced by movements in the euro and Japanese yen — has jumped more than 2.8% so far in October, leaving it at the highest level seen since mid-March.
Investors are flooding back into Britain’s commercial property market. Commercial property auctions are proving an unlikely bright spot in Britain’s real estate market where a steep drop in sterling has attracted overseas buyers and local investors are as yet unfazed by potential fallout from Brexit.
Oil is slipping. Oil prices fell early on Monday, pulled down by a rising rig count in the United States, record OPEC-output, and slowing global economic growth which could erode fuel demand. Around 6:40 a.m. BST (1:40 a.m. ET) US WTI crude is off 0.26% to $50.22 per barrel.
Australia’s central bank is sounding the alarm on Chinese debt. “Policymakers have both a strong incentive and scope to support growth and maintain financial stability in the near term,” the bank wrote. “But continued reliance on debt-financed growth and bank forbearance, along with official actions that reinforce perceptions of implicit government guarantees, add to existing vulnerabilities.
Britain could be plunged into a credit crisis if Brexit kills the housing market. Mortgages account for such a huge amount of bank lending, meaning that if prices were to plunge, Britain could find itself back in the depths of a credit crisis.
Asian shares dipped on Monday while the dollar held firm near seven-month high against a basket of major currencies after comments from Federal Reserve Chair Janet Yellen boosted long-dated U.S. bond yields. Around 6:45 a.m. BST (1:45 a.m. ET) shares in Hong Kong’s benchmark Hang Seng index are off 0.7%, while the China A50 index is 0.12% lower.
The importance of London’s financial passport is being exaggerated, according to a think tank. Britain needs to focus its efforts on the banking sector when negotiating new financial trading terms with the European Union as the benefits of unfettered access across the industry as a whole have been overplayed, think tank Open Europe said in a report on Monday.
There is a growing argument that the crashing pound is the best thing that could happen to Britain right now. Renowned Societe Generale strategist Albert Edwards argues that the recent crash in the pound, which has seen Britain’s currency plumb new lows on an almost daily basis in recent weeks, will benefit the UK by stimulating inflation, something that virtually every single developed nation is struggling to achieve right now.
However, the continuing devaluation of the renminbi is a more important story in the FX markets. Edwards argues in the same note that: “We warned in June that “sterling will fall with or without Brexit — but the renminbi decline matters more” and so it does. The Chinese have accelerated the renminbi devaluation, taking it to six-year lows versus the US dollar. This is the key global story to focus on, not the pound,” Edwards argues.
The number of people who regret voting for Brexit is now greater than the margin of victory for Leave. A poll from British Election Study, an academic group dedicated to voting trend research, has found that the portion of Leave voters who regret their vote (or “don’t know”) is greater than the total margin of victory for Brexit.
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