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U.S. Stocks Decline Amid Trade Woes

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U.S. shares fell as a wave of promoting pulled decrease all the pieces from financial institution shares to shares of expertise corporations.

The Dow Jones Industrial Common misplaced 262 factors, or 1%, to 26025. The S&P 500 declined 0.8%, and the Nasdaq Composite fell 0.6%.

Worries concerning the path of U.S.-China commerce negotiations and the worldwide economic system have saved shares and bond yields beneath strain for a lot of the month. Goldman Sachs analysts mentioned Monday that the outlook for commerce talks had “collapsed,” including that they consider Washington and Beijing gained’t attain an settlement earlier than the 2020 elections.

Few analysts consider the U.S. is headed towards an imminent downturn.

“Given the low unemployment and powerful shopper confidence within the U.S., it’s unlikely we get a recession any time quickly,” mentioned Patrick Spencer, managing director at U.S. funding agency Baird.

Nonetheless, others fear that the gloomy outlook mirrored in bond markets—the place yields throughout the globe have dropped in latest months—might quickly be mirrored in shares too.

“If [yields] maintain edging down, the fairness market is clearly flawed as a result of the bond market will probably be telling you we have now one mom of a recession coming,” mentioned Neil Dwane, world strategist at Allianz International Traders.

Merchants work on the ground on the New York Inventory Alternate on Aug. 9.


Picture:

don emmert/Agence France-Presse/Getty Photos

Financial institution shares took a contemporary hit Monday as U.S. Treasury yields retreated once more, with

Citigroup
,

Financial institution of America

and

Morgan Stanley

every dropping greater than 2%. Declining bond yields are likely to weigh on banks by chopping into their lending earnings.

Semiconductor makers additionally misplaced floor, with

Nvidia

down 1.4% and

Superior Micro Gadgets

dropping 2.5%.

Elsewhere, the Stoxx Europe 600 edged down 0.3%, weighed down by declines amongst lenders and journey and leisure shares.

Among the many largest gainers within the area was

Tullow Oil
,

TUWOY 18.13%

whose shares rose 20% after the corporate mentioned it had discovered extra oil off the coast of Guyana.

Hong Kong’s Dangle Seng Index fell 0.4% after protests on the metropolis’s airport prompted authorities to cancel greater than 100 flights. Chinese language authorities mentioned the violent weekend demonstrations marked the emergence of “the primary indicators of terrorism” within the semiautonomous metropolis—and vowed a cruel crackdown.

“Hong Kong is clearly an necessary bellwether for simply how far China is prepared to exert its affect,” mentioned Matthew Cairns, a senior charges strategist at Rabobank.

“It is a clear present of Chinese language power and I don’t suppose, simply as we’re seeing within the commerce warfare, that China will probably be prepared to permit overt breaches of its authority throughout the area and that clearly is having fairly damaging impact by way of the Dangle Seng,” he added.

The Shanghai Composite closed greater, although, notching a 1.5% achieve after China’s central financial institution continued to weaken the yuan, although at a slower tempo than merchants had anticipated. That helped ease considerations of a pointy devaluation after President Trump final week accused China of manipulating its foreign money.

Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com and Akane Otani at akane.otani@wsj.com

Copyright ©2019 Dow Jones & Firm, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business/Markets

Property Giant Adds to Deluge of Chinese Bond Deals

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China Evergrande Group

EGRNF 3.85%

grew to become the nation’s newest property developer to faucet worldwide bond markets, providing double-digit yields on as much as $2 billion of latest greenback debt.

The Hong Kong-listed group offered $1 billion apiece of three- and four-year bonds, priced at par with rates of interest of 11.5% and 12% respectively, in keeping with a time period sheet on Friday.

Chinese language property firms have kicked off the 12 months by promoting billions of {dollars} of longer-dated bonds, capitalizing on a scorching market to scale back their heavy reliance on short-term funding.

Nonetheless, Evergrande caught to comparatively short-dated bonds and provided greater yields than some friends. This week,

Kaisa Group Holdings

1638 -1.23%

offered a $300 million bond with a 5.5-year maturity at 9.95%. Each units of bonds have been rated B2 by Moody’s Traders Service Inc., or 5 notches beneath investment-grade.

“The sheer quantity of bonds excellent from Evergrande could result in market indigestion, which can clarify why buyers demand a better yield than different Chinese language builders with related rankings,” mentioned Luther Chai, an analyst and credit score strategist at CreditSights in Singapore.

Excluding bonds offered by means of personal placements, Evergrande has 12 greenback bonds with a mixed face worth of practically $18 billion excellent, in keeping with CreditSights. Moody’s estimates the corporate’s whole debt was $132.5 billion as of June 2019.

Mr. Chai mentioned Evergrande hadn’t caught to commitments to chop debt within the final monetary 12 months, presumably due to its capital-intensive electrical-vehicle enterprise. That meant restricted visibility on its credit score profile greater than three years out, he mentioned. “Lots hinges on the March outcomes, the place we’ll see in the event that they preserve deleveraging guarantees made final 12 months,” he mentioned.

A Hong Kong-based hedge-fund supervisor, who positioned orders for the bonds, mentioned the yields have been enticing and different buyers frightened an excessive amount of about its leverage. Nonetheless, a second hedge-fund investor disagreed, saying it was exhausting to get comfy with investing in its debt.

In a submitting, the corporate mentioned Chairman

Hui Ka Yan

and Chief Govt Xia Haijun every purchased $50 million of the bonds “to suggest their help to and confidence in” Evergrande. Unusually, in 2018 Mr. Hui purchased greater than half of a earlier $1.eight billion bond deal.

Final month Evergrande mentioned it might pay a $2.7 billion dividend. Most of that will go to Mr. Hui as the corporate’s majority proprietor.

Write to Frances Yoon at frances.yoon@wsj.com

Copyright ©2019 Dow Jones & Firm, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Norwegian polysilicon maker rallies 56 per cent on US-China trade deal

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Shares within the Norwegian polysilicon producer REC Silicon jumped by 56 per cent on Thursday after China agreed to purchase extra US provides of the photo voltaic panel materials as a part of a phase-one commerce deal.

China agreed to purchase an extra $77.7bn of manufactured items from the US over the following two years as a part of the deal signed on the White Home on Wednesday. That features purchases of US polysilicon, the settlement mentioned.

“It’s actually constructive that the US authorities has recognised the significance of the US polysilicon trade. Being locked out of the worldwide marketplace for polysilicon for the final a number of years has price the US high-paying jobs and billions of {dollars} in funding,” Tore Torvund, chief govt of REC Silicon mentioned.

Polysilicon is a vital materials for photo voltaic panels and semiconductors. China accounts for over 92 per cent of world polysilicon demand as a result of its dominance in photo voltaic panel manufacturing.

In 2014, China imposed tariffs on US solar-grade polysilicon. That pressured REC to shut its $1.7bn polysilicon plant in Moses Lake, Washington state final July and lay off 450 staff, it mentioned.

REC and two different US polysilicon producers Hemlock Semiconductor and Wacker Polysilicon welcomed the settlement in an announcement on Wednesday.

“We hope this settlement will end in a extra degree enjoying discipline for this essential constructing block to the photo voltaic and electronics industries,” Mark Bassett, chief govt of Hemlock Semiconductor Operations, which is predicated in Michigan, mentioned.

“Sustaining and increasing US manufacturing capability is significant to supporting high-wage American manufacturing jobs based mostly on high-tech innovation.”

Shares in REC Silicon rose by 56 per cent to commerce at NKr4.812.

Shares in Germany’s Wacker Chemie, which owns Wacker Polysilicon, rose by three per cent to commerce at €65.68.

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Barclays, FactSet Offer New Tool to Navigate Opaque Bond Market

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The 325-year-old U.Ok. financial institution, run by Chief Government

Jes Staley,

stated Wednesday it’s making a proprietary instrument it makes use of to measure liquidity in additional than 22,000 bonds obtainable to subscribers of FactSet, leveraging its personal inner knowledge on $50 trillion of fixed-income securities.

Knowledge is the subsequent frontier for big funding banks, which sit between transactions executed as hedge funds, asset managers, pension funds and insurers transfer cash across the globe in monetary markets.

Rival funding banks on Wall Avenue—together with

Goldman Sachs Group Inc.

and

JPMorgan Chase

& Co.—have employed troves of information scientists and technologists to construct new platforms and programs that may harness giant quantities of data to glean insights into buying and selling habits or how monetary devices transfer.

“New knowledge and know-how are driving change throughout the funding business at an unprecedented tempo, and we’re more and more seeing this impression in fastened earnings,” stated

Wealthy Newman,

international head of content material and know-how options at FactSet.

The Barclays instrument, often called the Liquidity Value Scores (LCS), is an enormous enterprise utilizing laptop packages to compile and analyze two-way costs made by human merchants throughout a broad vary of securities, from U.S. investment-grade bonds to emerging-market bonds.


‘Market liquidity is an ever-present concern for fixed-income portfolio managers.’

—Vadim Konstantinovsky of Barclays

Barclays created LCS in 2009, and it’s supposed to mirror the price of an instantaneous, institutional-size, round-trip transaction. It’s expressed as a share of the bond’s value.

“Asset managers are likely to desire liquidity analytics which can be intuitive” stated

Amy Mignosi,

a member of the Barclays Reside gross sales crew, in an interview with The Wall Avenue Journal. “LCS is predicated off precise two-way quotes from our buying and selling desks. Its calculation doesn’t contain complicated mathematical fashions.”

Barclays was a primary mover in constructing electronic-trading programs for foreign money markets within the early 2000s, alongside Deutsche Financial institution AG. Now it sees the profit in monetizing its knowledge round liquidity—a problem that grew to become a larger focus for buyers after a sequence of hiccups in markets together with the spike in repo charges in September 2019 and volatility in oil in August 2019.

Liquidity is a measure of how straightforward it’s to purchase or promote completely different investments. When it dries up, it has the ability to dislocate costs, and at its most excessive it will probably bankrupt monetary establishments or asset managers.

“Market liquidity is an ever-present concern for fixed-income portfolio managers,” stated

Vadim Konstantinovsky,

a senior Barclays quantitative analysis analyst, in an interview with the Journal. “Transaction-costs issues at all times issue into their determination making. Many a method promising robust efficiency seems unprofitable when the price of execution is taken into consideration.”

For FactSet, the deal underscores a development in fixed-income markets: the search for transparency.

Whereas equities and currencies are largely traded through digital platforms, the bond markets have been slower to modernize. Nearly all of transactions stay “over-the-counter”—that means that they aren’t cleared, trades aren’t publicly listed, they usually happen between two events, normally over the cellphone or through digital chats.

However that’s beginning to change. Digital buying and selling surged to 34% of investment-grade company bonds in November, in line with a current examine by analytics agency Greenwich Associates.

The yield on the benchmark 10-year Treasury observe, which helps set company borrowing prices, closed Wednesday at 1.788%, down from 1.817% Tuesday. The WSJ Greenback Index, which measures the U.S. foreign money in opposition to a basket of 16 others, declined 0.1% to 90.20.

Copyright ©2019 Dow Jones & Firm, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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