Trump hits new target in China dispute, bond rally continues, and pound finally reacts to Brexit. His way or the HuaweiIn an escalation of the standoff with China, President Donald Trump moved to curb Huawei Technologies Co.'s access to the U.S. market and American suppliers. This would not only cut the company off from the U.S. market but also stop it buying essential supplies from chip giants such as Qualcomm Inc. and Micron Technology Inc., while also threatening the rollout of 5G technology across the world. A spokesperson for China's Foreign Ministry said the country will take all necessary measures to defend legitimate interests of its companies. Bond rallyThe trade war heating up, continued worries about conflict in the Middle East and concerns over growth have all sent investors rushing to the relative safety of bonds. Treasury yields dropped again this morning, reaching the lowest level on a closing basis since 2017. Goldman Sachs Asset Management International is sounding a word of caution, saying yields are poised to rebound as the U.S. economy is just too healthy for Treasuries to be at this level. Also worth noting: China's holdings of the global benchmark have started to fall for the first time since November. Pound fallsSterling dropped to a three-month low of $1.2821 this morning and headed for its longest losing streak against the euro since 2000 as the risk of a no-deal Brexit flared up again. The main opposition Labour Party said it wouldn't back Prime Minister Theresa May's latest attempt to get her withdrawal agreement through Parliament, even as she faces more leadership challenges from within her own party. Meanwhile, there are further signs that companies in the U.K. are suffering from the continued uncertainty. Markets mixedOvernight, the MSCI Asia Pacific Index slipped 0.3% while Japan's Topix index closed 0.4% lower with electronics makers weighing on the gauge in the wake of Trump's move against Huawei. In Europe, the Stoxx 600 Index was broadly unchanged at 5:50 a.m. Eastern Time in a session that has mostly traded in negative territory. S&P 500 futures pointed to a fairly quiet open, the 10-year Treasury yield was at 2.375% and gold eased. Coming up…At 8:30 a.m., we get the weekly update on jobless claims, with U.S. April housing starts and the Philadelphia Fed business outlook also at that time. Fed Vice Chairman for Supervision Randal Quarles, Minneapolis Fed President Neel Kashkari and Fed Governor Lael Brainard are today's monetary speakers. Walmart Inc., Nvidia Corp. and Baidu Inc. all report earnings. What we've been readingThis is what's caught our eye over the last 24 hours. Want the lowdown on European markets? Get the European edition of Five Things in your inbox before the open, every day. And finally, here's what Joe's interested in this morningEverything's coming up Treasuries. Between signs of a global slowdown, concerns of a trade war, and political tensions in Europe, yields on U.S. government bonds have been tumbling. Yesterday, I half-joked that we should publish a story arguing that fears of China dumping its Treasuries were helping to fuel the rally. Except it's really not a joke. People have this vision of China holding America over a barrel, because the country buys so much of its government debt, and that if it were to sell, interest rates would soar and the U.S. economy would be toast. But it wouldn't work out this way. Long-term Treasury yields are a function of expected Fed policy over time. And the latter is driven by inflation and growth dynamics. So unless Chinese Treasury selling had an impact on U.S. inflation and growth, there's no particular reason to think that the price would meaningfully change. What's more plausible than spiking yields is that if word got out that China really did want to dump U.S. debt in size. Yields would fall because people would assume that this "nuclear option" represented a gigantic break in the U.S.-Sino relationship. All that would hurt the global economy, causing the Fed to be even slower with expected rate hikes. In the immediate term, there would likely be a flight to Treasuries, amid a big risk-off move in markets. The Treasury market often behaves counterintuitively. When the Fed did fresh rounds of QE (bond buying), yields typically rose. When people got anxious about the debt ceiling in recent years -- a potential default -- yields typically fell. So if you're assembling a list of reasons to buy Treasuries, you can add fears of Chinese selling.  Like Bloomberg's Five Things? Subscribe for unlimited access to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. Before it's here, it's on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can't find anywhere else. Learn more. | 
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