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The troubles facing highly indebted property developers in China have dominated conversations about the Asian nation’s economy and markets this year. Yet according to Rayliant Global Advisors’ Jason Hsu, there’s an important distinction between this and past housing crises elsewhere which is guiding policymakers’ response to it: The developers are the ones who are over-leveraged, not the households.
China’s property sector has yet to see the worst of the crisis that has cast a pall over the nation’s economy and helped drive an exodus of global funds from the world’s second-largest stock market.
Real estate developer Post Brothers landed a $312 million refinancing for a major apartment building in Philadelphia.
French billionaire Bernard Arnault’s dealings with a Russian businessman are being investigated for possible money laundering, the Paris public prosecutor’s office said Friday.
Shopper Park Plus Zrt., an investor in retail parks in both Hungary and the Czech Republic, aims to raise as much as €53.1 million ($56.2 million) in the first euro-denominated initial public offering on the Budapest Stock Exchange.
Feb 15, 2020
, Bloomberg News
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Traders are so fixated on the coronavirus that, in the absence of compelling reasons to do otherwise, they’re piling into hedges in case the contagion is a disaster for the global economy.
Much of the activity involves bets that the Federal Reserve will feel increased pressure to reduce interest rates. A flurry of eurodollar options trades emerged this week that profit if the central bank delivers more than the one-to-two quarter-point cuts already priced in for 2020.
During the holiday-shortened week ahead, there’s little in the calendar of events that looks likely to pull investors away from virus headlines.
“The impact of the virus on the global economy is going to be significantly more than what people are expecting, and when the global economy goes south, the Fed steps in,” said Tony Farren, managing director at broker-dealer Mischler Financial in Stamford, Connecticut.
Farren is paying more attention than usual to Australian data, given the country’s dependence on China, seeking clues about any spillover effects from the virus called Covid-19. A March rate cut by the Fed would surprise him, “but June is possible and poor economic data in the summer would open the door to cuts in September and possibly December,” Farren said.
Minutes of the Federal Open Market Committee’s Jan. 28-29 meeting, to be released Wednesday, cover a period in which policy makers were still monitoring the virus originating from China.
A more real-time view -- Treasuries trading from the past few days -- shows market participants are worried about the economy’s prospects. A flight-to-quality move ahead of the three-day weekend drove the widely watched spread between 2- and 10-year yields to the flattest level since November.
Strategists at Deutsche Bank AG and Credit Suisse Group AG argue the Fed could be forced to cut rates by July.
Citigroup Inc.’s Calvin Tse is bracing for markets to price in a preemptive March reduction. This week he recommended a trade involving the overnight index swap dated around the March 17-18 meeting of Fed policy makers. The swap only implies a slight chance of easing. But if those odds increase, “this trade can make a lot of money,” he said in an interview.
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--With assistance from Edward Bolingbroke.
To contact the reporter on this story: Vivien Lou Chen in San Francisco at vchen1@bloomberg.net
To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Nick Baker, Mark Tannenbaum
©2020 Bloomberg L.P.
