Five Things You Need to Know to Start Your Day

SHARE THIS ARTICLE Facebook Twitter LinkedIn Email

Want to receive this post in your inbox every morning? Sign up here

U.S.-China trade-war tensions escalate, the vaunted Bank for International Settlements says Bitcoin could break the Internet, and ... what will OPEC do? Here are some of the things people in markets are talking about.

No Backing Down in U.S.-China Trade War

President Donald Trump has directed the U.S. Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent. Trump said he was taking action because China “has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology.” U.S. Secretary of State Mike Pompeo amplified Trump’s tough line on trade in a speech Monday, saying U.S. action was long overdue and calling Chinese appeals for greater economic openness “ a joke.” The comments come as Chinese President Xi Jinping appears poised to match Trump blow for blow in tariffs. In his announcement of levies on Chinese goods on Friday, Trump had vowed additional duties if China retaliated — which Beijing immediately did. Analysts increasingly expect the confrontation to be a war of attrition. 

OPEC in the Spotlight

OPEC is discussing a relatively modest production increase before its meeting in Vienna this week, an attempt to bridge the gap between Russia’s push for a big boost and Iran’s insistence that no change is needed. A compromise could mean the resulting supply boost is smaller than oil traders had anticipated. Members of the Organization of Petroleum Exporting Countries are discussing an agreement that delivers 300,000 to 600,000 barrels a day of additional supply to global markets over the next few months, according to people briefed on the talks. That would be smaller than the 1.5 million-barrel-a-day quota increase that Russia has proposed.

A BOJ About-Face?

The Bank of Japan should accept that it is making no headway in its efforts to get to 2 percent inflation and start normalizing policy, according to Tokyo University professor Tsutomu Watanabe, a former BOJ official and longtime advocate of the price-increase goal. "The last five years have confirmed that the policy hasn’t had any effect" on prices, Watanabe said in an interview this month, referring to the central bank’s aggressive easing measures aimed at stoking inflation. "At some point you have to give up." Watanabe first called for the introduction of an inflation target in the late 1990s.

Bitcoin Could Break the Internet

The Bank for International Settlements just told the cryptocurrency world it’s not ready for prime time —  and,  as far as mainstream financial services, go, may never be. In a withering 24-page article released Sunday as part of its annual economic report, the BIS said Bitcoin and its ilk suffered from “a range of shortcomings” that would prevent cryptocurrencies from ever fulfilling the lofty expectations that prompted an explosion of interest —  and investment — in the would-be asset class. The 88-year-old institution, based in Basel, Switzerland, analyzed what it would take for the blockchain software that underpins Bitcoin to process the digital retail transactions currently handled by national payment systems. As ledgers swell, the researchers found, they would eventually overwhelm everything from individual smartphones to servers. “The associated communication volumes could bring the Internet to a halt,” the report said.

A Warning for the Developed World

Former U.S. Treasury Secretary Lawrence Summers warned that developed countries are badly equipped for another recession, both economically and politically, and that central banks should be wary of raising interest rates just to stop inflation from running a little hot. “The consequences of another economic downturn dwarf and massively exceed any adverse consequences associated with inflation pushing a bit above 2 percent,” Summers said Monday at a European Central Bank conference in Sintra, Portugal. His comments echoed sentiments earlier on Monday by billionaire hedge fund manager Paul Tudor Jones. “The next recession’s really frightening, because we won’t have any stabilizers,” Jones said on Yahoo Finance. “Monetary policy will exhaust really quickly,” while fiscal stimulus won’t be available, he said.

What we’ve been reading

This is what caught our eye over the last 24 hours.

ZTE talks on the docket in Washington. Investors aren’t discerning as they pull out of emerging Asia.  Don’t declare the end of easy money just yet. Google is training machines to predict when people will die. Trump lambastes Merkel over migrant crisis.  Here’s the mistake you made in your World Cup bracket.