Here are the top five things you need to know in financial markets on Thursday, August 23:
1. U.S.-China tariff tensions escalate
As another round of U.S. new tariffs on $16 billion in Chinese goods went into effect on Thursday, Beijing was quick to respond with promises to file a new complaint with the World Trade Organization and retaliatory tariffs for the same amount.
The tit-for-tat trade dispute between the two world powers has seen mutual tariffs rise to $100 billion since July.
The new round of tariffs go into effect even as U.S. and Chinese officials are gathered in Washington for two days of talks in what are the first formal negotiations since last June.
U.S. President Donald Trump poured cold water over hopes from the discussions, stating last Monday in an interview with Reuters that he didn’t “anticipate much” of an outcome.
Trump has previously threatened place tariffs on almost all of the more than $500 billion of Chinese goods exported to the U.S.
2. Fed minutes show support for rate hikes with Jackson Hole ahead
Markets will keep a close eye on the gathering of prominent central bankers, finance ministers, economists and academics at the annual Jackson Hole Economic Symposium which kicks off on Thursday.
Although the official program will not be released until 8:00 PM ET (00:00 GMT Friday), the Federal Reserve has confirmed that its chairman, Jerome Powell, will deliver a speech at 10:00 AM ET (14:00 GMT) Friday on “Monetary Policy in a Changing Economy”.
Markets will pay close attention to Powell’s remarks for any signals on the future path of monetary policy.
The minutes from the latest policy meeting released on Wednesday confirmed that policymakers are ready to keep raising rates at a moderate pace in light of above-trend growth.
“Members expected that further gradual increases in the target range for the federal funds rate would be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2% objective over the medium term,” the minutes said.
3. U.S. stocks on hold amid trade tensions, political uncertainty
U.S. futures pointed to a flat open on Thursday as the major indices held near record highs and traders watched developments over the U.S.-China trade conflict and kept an eye on uncertainty in the political arena after the legal woes of two of Trump’s former advisers.
Trump's former campaign chairman Paul Manafort was convicted this week on eight counts and the president’s former lawyer Michael Cohen made a plea deal and said he violated the law at the behest of Trump, making for a predictably bumpy road for the President heading into mid-term elections.
Nevertheless, stocks have been climbing higher, recently hitting new all-time highs and also logging the longest bull market run in history. At these dizzying heights, caution of the current political situation and continuing tensions between the U.S. and its major trade partners looked to keep American equities in check on Thursday. At 5:52 AM ET (9:52 GMT), the blue-chip Dow futures was unchanged, S&P 500 futures inched up less than a point, or 0.02%, while the NASDAQ 100 futures slipped 2 points, or 0.02%.
With trade tensions back on the forefront, the dollar managed to break a five-day losing streak against major rivals on Thursday as investors piled back into the safe haven currency, pulling the greenback off its lowest level since August 8 which it reached on Wednesday.
4. Saudi Arabia denies calling off Aramco IPO
According to a report by Reuters citing four senior industry sources on Wednesday, Saudi Arabia had decided to put its domestic and international stock listing of its state oil company Aramco on hold.
The explanation given for calling off what was expected to be the biggest such deal in history was that Saudi Arabia had shifted its attention to the acquisition of a “strategic stake” in petrochemicals maker Saudi Basic Industries.
However, Saudi Arabia denied on Thursday that the initial public offering had been called off. "The government remains committed to the initial public offering of Saudi Aramco, in accordance with the appropriate circumstances and appropriate time chosen by the government,” Saudi energy minister Khalid al-Falih said in a statement.
He added that the exact timing would depend on factors including favorable market conditions, and a planned downstream acquisition in the next few months.
5. Bitcoin slumps as SEC rejects ETF proposals
Cryptocurrency prices slumped on Thursday as the U.S. Securities and Exchange (SEC) rejected nine proposals for Bitcoin ETFs.
At 6:00 AM ET (10:00 GMT), Bitcoin fell 4.04% in the last 24 hours to reach $6,405.00 on the Bitfinex exchange.
Ethereum sank 4.71% to $271.54 in the last 24 hours.
Ripple tumbled 6.77% to $0.32016.
Bitcoin Cash, product of the Bitcoin fork and the fourth largest cryptocurrency by market capitalization, slid 5.55% to $517.85.
The latest rejection included two ETFs filed by ProShares that would track bitcoin futures contracts, another from GraniteShares, and five leveraged and inverse ETFs from Direxion.
The SEC expressed concern about fraud and manipulation of bitcoin markets, and said that the proposals had not met the regulator’s requirement "that a national securities exchange's rules be designed to prevent fraudulent and manipulative acts and practices. Among other things, the Exchange has offered no record evidence to demonstrate that bitcoin futures markets are 'markets of significant size’.”
The reports came after the regulator cited similar concerns and rejected the Winklevloss ETF in July that would have traded physical bitcoin.
So far, the SEC has yet to approve a cryptocurrency-based ETF. The regulator announced in July that it postponed a decision on approving VanEck ETF until Sept. 30.
