[Bloomberg](
Trade hopes spring eternal, Hong Kong forecasts first annual recession since financial crisis, and Labour looks to nationalizations.
Final stages
White House economic adviser Larry Kudlow said that [negotiations over a phase one trade deal with China]( are down to the final stages, with both sides in communication every day. Talks are focusing on details such as the [timeline of Chinese purchases of agricultural goods]( and Beijingâs demand for the removal of existing tariffs as part of a deal. This morning global shipping giant A.P. Moller-Maersk A/S added its voice to those [warning about the fallout from the trade war](, saying it is less optimistic about growth as the standoff dents the economic outlook.
Revising lower
Hong Kong is now forecasting an [economic contraction of 1.3% for 2019]( with the government citing an âabrupt deterioration in the third quarterâ which it blamed on âlocal social incidents.â There is little sign the driver of the slowdown is easing, with protesters gathering in the cityâs financial district again today. Chinese President Xi Jinping, in a rare remark on the demonstrations, said bringing the violence to an end is Hong Kongâs â[most urgent task](.â Thereâs also urgency for the cityâs bankers who have started to [shorten their day amid the protests](, with deals closing much earlier than usual this week.Â
Electioneering
The campaign for the Dec. 12 U.K. election is stepping up a gear with the Labour Party pledging to [nationalize BT Group Plcâs Openreach broadband unit]( to give free internet to everyone in Britain. The party said it would pay for the nationalization with government debt. Shares in BT [dropped as much as 3.7%]( in London trading. Bankers in London [donât see much prospect of a Labour-led government](, but have started some contingency planning in case it does come to pass. With the Conservative Party [holding a clear lead in polls](, it currently seems like the nationalization policy has little chance of coming to pass.Â
Markets rise
Larry Kudlowâs positive comments about trade progress have been enough to give global equity markets a small Friday lift. Overnight, the MSCI Asia Pacific Index added 0.5%Â while Japanâs Topix index closed 0.7% higher, which wasnât enough to avoid its first weekly drop since early October. In Europe, the Stoxx 600 Index had gained 0.1% by 5:50 a.m. Eastern Time. S&P 500 futures [pointed to positive open](, the 10-year Treasury yield was at 1.834% and gold had slipped.Â
Coming upâ¦
U.S. October retail sales data at 8:30 a.m. is expected to show a rebound from the previous monthâs negative number. At 9:15 a.m. Industrial Production and Manufacturing numbers for October are forecast to show a further slowdown. Todayâs impeachment hearing is likely to focus on Rudy Giuliani's back-channel efforts to pressure Ukraine's president. J.C. Penney Co. Inc. reports earnings.Â
What we've been reading
This is what's caught our eye over the last 24 hours.Â
- Ray Dalio warns of [capital war]( between the U.S. and China.
- Goldman [stumbles on path to main street]( with Apple card turmoil.Â
- NYC, London and Vancouver [losing luster]( with luxury homebuyers.
- Russia is [making more money]( from OPEC+ deal than Saudi Arabia.Â
- European Investment Bank to cut off [fossil-fuel financing](.
- Banks are [struggling to value good behavior](.Â
- [Objective reality doesnât exist](.Â
And finally, hereâs what Luke's interested in this morning
During his two days of testimony before the Joint Economic Committee of Congress, Federal Reserve Chairman Jerome Powell emphasized that the U.S. fiscal trajectory is unsustainable. He judges fiscal sustainability to be determined by whether debt is growing faster than GDP. If it is, then it's definitionally unsustainable. (Japan, over in the corner, is saying, âHold my sake.â) Itâs debatable, given Powellâs definition, if the U.S. really is on an unsustainable footing. According to the U.S. Office of Management and Budget, the ratio of debt-to-GDP has been flat for the last four years. Powellâs comments were also accompanied with a concern about business investment in the present (because of slow global growth, demographics, and the trade war) as well as the long run, because of elevated government debt. This speaks to the potential for a âcrowding outâ dynamic: the idea that government borrowing both utilizes real resources and potentially pushes up interest rates in a manner that reduces private capital expenditures. However, he didnât seem to allow for or endorse the possibility of âcrowding inâ â government spending supporting higher aggregate demand and business investment â to improve the current situation. During Thursdayâs testimony, Powell somewhat softened some of the fears surrounding debt that he had fanned. Any day of reckoning on the U.S. debt load âcould be quite far offâ â more than a decade, at least, even on the current trajectory â he said, due to the U.S. dollarâs role as the worldâs reserve currency and the depth and breadth of the U.S. economy and financial markets. That means the U.S. retains fiscal space to support growth in a downturn, he added.
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](.
[FOLLOW US [Facebook Share]]( [Twitter Share]( [SEND TO A FRIEND [Share with a friend]](
You received this message because you are subscribed to Bloomberg's Five Things newsletter.
[Unsubscribe]( | [Bloomberg.com]( | [Contact Us](
Bloomberg L.P. 731 Lexington, New York, NY, 10022