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Covid confusion

October 05, 2020
Five Things - Asia
Bloomberg

Trump's doctors give contradictory accounts of his health. Brexit is set for a showdown this week — over fish. And is SoftBank finally going private? Here are some of the things people in markets are talking about today.

Another Drug

President Donald Trump's doctors have added dexamethasone to his treatment, a drug that's typically used in more severe Covid-19 patients. "The president has continued to improve," White House physician Sean Conley, Trump's lead doctor, told reporters on Sunday, although it wasn't clear why they were giving him a drug typically used in deteriorating or severe patients if that was the case. At the briefing, Conley admitted earlier giving a misleading statement about the president receiving oxygen, the latest in a series of contradictory and confusing accounts about Trump's health. He said he had told reporters that Trump had not been given oxygen Friday, when in fact he had, to "reflect the upbeat attitude" of Trump and his doctors. At Sunday's briefing doctors insisted the president is doing well and could be discharged as soon as Monday.

Markets Rally

U.S. and Asian stocks looked set for gains Monday as traders reacted to the possibility President Donald Trump may be able to leave hospital as soon as Monday. The yen retreated. Futures pointed higher in Japan and Australia, where markets are open though volumes are expected to be low because of a holiday. S&P 500 contracts climbed after U.S. stocks finished lower on Friday in a volatile day for global financial markets. Crude oil ticked higher after Friday's slump. The pound fluctuated following a weekend call between U.K. Prime Minister Boris Johnson and European Commission President Ursula von der Leyen on Brexit.

Fish Fights

Brexit is set for a showdown at a European Union summit this week. French President Emmanuel Macron's reluctance to make concessions on fishing rights is stirring concern among officials he could sink efforts to reach a wider trade accord as negotiators begin a two-week period of intense talks on Monday. The fishing industry may represent only a tiny proportion of the French and U.K. economies, but it has assumed out-sized political importance lately: Britain is keen to reclaim its seas, while the EU risks losing prime fishing grounds. The EU's chief negotiator, Michel Barnier, will discuss Brexit with German Chancellor Angela Merkel in Berlin on Monday too, a sign the bloc is weighing where it can and cannot make concessions. Meanwhile it's not looking any rosier for the British Prime Minister at home. He said he knows people are "furious" over the way his government has handled the pandemic, but warned that coronavirus will make for a "very tough" winter, with difficulties lasting through Christmas and beyond.

A Bad Idea?

Inside SoftBank, the idea of going private through a buyout has been discussed off and on for at least five years. Almost everyone except founder Masayoshi Son opposes it, people with direct knowledge of the matter said. The reasons are substantial: No one has pulled off a buyout anywhere close to SoftBank's $130 billion valuation, it's not clear the company could raise the necessary financing and such a complex deal would prove a distraction for at least a year, the people said. Senior managers also worry that without public shareholders, it would be harder to keep Son's wildest impulses in check, one person said. That doesn't mean a deal is out of the question. "Everything Son is doing suggests that they are planning to take the company private," Bloomberg Intelligence senior analyst Anthea Lai said.

On Hold

Australia's central bank is expected to keep its powder dry for another month as it clears the airwaves and commentary pages for the government's anti-recession fiscal program in Tuesday's budget. The Reserve Bank of Australia is forecast to keep interest rates and its three-year yield target unchanged at 0.25% on Tuesday. While a number of economists predict an easing of policy, the balance see the board waiting until November. The central bank is keeping borrowing costs low across the economy via its bond-buying and bank-lending programs. RBA No. 2 Guy Debelle last month set out potential additional options, including taking the cash rate to 0.10%, buying longer-dated government bonds, currency intervention and negative rates. Policy makers played down the likelihood of the latter two options.

What We've Been Reading

This is what's caught our eye over the past 24 hours:

And finally, here's what Adam's interested in this morning

One of the key changes in the investment landscape this year has been the rapid slide in interest rates globally. That is forcing many to continually rethink the return prospects of assets given such low risk-free rates, and the valuations they are prepared to pay to own them.

In Asia, money has flowed into high-yield bonds and tech stocks as part of this search for higher levels of income. Firms likes Pictet Asset Management reckon high-yield credit is attractive and Taiwanese technology companies are favored by JPMorgan Asset Management. 

This is not a phenomenon that is likely to change any time soon. The Federal Reserve, in its final meeting before the U.S. election, made it clear that rates were staying on hold for some time. With central banks around the world prepared to keep the hammer down and provide more stimulus that thirst for yield isn't about to dry up. 

Adam Haigh is an editor covering global markets for Bloomberg News in Sydney.
 

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