Take Five: Bulls charge past hurdles

Take Five: Bulls charge past hurdles
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June 5 (Reuters) –

1/CROUCHING TIGER

Have HSBC and Standard Chartered “chosen profits over human rights” in backing China’s national security law for Hong Kong, as some suggest? Or does it reflect the tightrope businesses must navigate between Hong Kong’s protesters and Beijing?

U.S. special treatment for Hong Kong is now in doubt as is the city’s role as a finance hub. Its position as a major goods trading centre will be threatened if wares become subject to the higher import tariffs paid in mainland China or if U.S. imports no longer enjoy zero rates.

One silver lining may be more IPOs by Chinese firms ditching their New York listings or mainland newcomers debuting in Hong Kong rather than on Nasdaq.

But as Beijing tightens its grip, an American Chamber of Commerce survey showed 30% of respondents were considering moving capital, assets or business operations. Heed Western warnings or stick with Beijing? It’s a choice more companies will have to make.

2/STOCK RALLY, YIELDS UP

The U.S. Fed might be watching the steepening Treasury yield curve with trepidation. The steepening — when longer-dated yields rise faster than short-tenor ones — signals a brighter growth outlook. But too fast a rise in borrowing costs can strangle economic recovery.

After the June 9-10 FOMC meeting, investors will listen for the Fed’s views on the economic outlook; an upbeat tone could further feed the stocks rally and trigger Treasury selling.

That may train more attention on the curve; the 5-year/30-year segment is at the steepest since end-2017, rising around 30 bps in the past month. Few expect Fed action this month but it may well signal additional bond-buying or yield curve control measures ahead.

Source: Reuters

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