5 things to start your day

Five Things
Bloomberg

Trump keeps pressure on Chinese companies, Saudi Arabia has a warning for oil speculators, and Covid cases rise. 

Tencent next?   

The Trump administration is asking gaming companies to provide information on their data-security protocols involving Chinese technology giant Tencent Holdings Ltd, according to people familiar with the matter. That builds on White House pressure on Chinese companies operating in the U.S. after Trump forced sweeping changes to how Bytedance Ltd.'s TikTok app is owned. The president is yet to approve the latest proposal on TikTok, although the Treasury has given it a thumbs-up. Shares in Tencent dropped as much as 3.1% in Hong Kong trading.

Oil warning

Saudi Energy Minister Prince Abdulaziz bin Salman had a clear warning for oil speculators yesterday when he said he would "make sure whoever gambles on this market will be ouching like hell." His comments came as concerns rise that the market for crude will remain fragile for longer than previously forecast as demand fails to re-emerge. Oil has staged something of a rebound from levels hit last week when Brent dropped below $40 a barrel, with the international benchmark trading at around $43.50 this morning

Lockdowns

The number of Covid-19 cases globally passed 30 million as many countries attempting to start to return to normal face setbacks. Data from London today will be in focus amid media reports of a surge in infections. The country's Health Secretary declined to rule out another lockdown. France has warned that Covid-19 is "very active again" in the country, and Germany's economy minister warned of the effects of further restrictions. On the vaccine front, Moderna Inc., and then later Pfizer Inc. and its partner BioNTech SE, disclosed detailed information about their late-stage trials in an effort to assuage worries the process has become politicized. 

Markets quiet

While there are few new catalysts to drive stock investor sentiment today, the expiry on options and futures on indexes and equities today -- known as quadruple witching -- could lead to some volatility later. Overnight the MSCI Asia Pacific Index added 0.6% while Japan's Topix index closed 0.5% higher. In Europe, the Stoxx 600 Index was broadly unchanged at 5:50 a.m. Eastern Time. S&P 500 futures were similarly becalmed, the 10-year Treasury yield was at 0.676% and gold was up. 

Coming up...

The August Leading Index and September University of Michigan Sentiment Survey are both published at 10:00 a.m. The latest Baker Hughes rig count is at 1:00 p.m. The post-FOMC rush of Fed speakers is in full flow today, with St. Louis Fed President James Bullard, Atlanta Fed President Raphael Bostic and Minneapolis Fed President Neel Kashkari. Donald Trump and Joe Biden are both in Minnesota. 

What we've been reading

This is what's caught our eye over the last 24 hours.

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

The customary calls for volatility around the race for the White House have an edge of urgency this year.

First, there's the significant possibility of a change of administration: FiveThirtyEight's poll aggregator this week put the odds of Joe Biden winning the electoral college as high as 75.9%. Then there's the possibility of delayed results -- with mail-in ballots expected to reach record levels in the midst of the pandemic -- or the threat of a contested outcome.

Homing in on the rates market, our Stephen Spratt says U.S. Treasury options are pricing the Decision Day 2020 as one of the biggest isolated event risks in at least a decade. He's looking at derivatives on the ICE BofA MOVE Index that measure expected swings in Treasury yields across the curve -- the gap is at levels seen only once since 2009 between options over a one- and three-month timeframe. The former is at an all-time low, and the latter captures the Nov. 3 vote.

This mounting anxiety -- apparent also in gauges of equity- and currency volatility -- could make it difficult for risk assets to recover their momentum. Corporate bond markets are already trudging against the tide of supply, as companies rush deals to market while conditions remain favorable. U.S. investment-grade bond sales have already surpassed the full-year record and the high-yield tally is on track for the same.

It's interesting, then, how many notes in this humble bond reporter's inbox are touting bullish views on riskier credit.

UBS strategist Matthew Mish sees this flood of supply slowing heading into the election and the year-end, and the bank recently adjusted down year-end targets for U.S. investment-grade and high-yield spreads.

As for the scenario analysis, the best case for credit, according to UBS's Mish, would be a Biden win and a split Congress. In his view, that combination would probably lower the risk of higher corporate taxes denting earnings, and it could "reduce foreign policy risks" -- in particular, the growing investor angst about U.S./China relations that was highlighted in UBS's latest investor survey. And while we're consulting the wisdom of crowds, the latest Bank of America survey showed four in five investors reckoned a flip to a Democrat-controlled Senate would be a "risk-off" scenario. Though just 11% saw benchmark 10-year yields busting out of their 0.5-1% range before the end of the year.

Let's see how these notions get shaken up, or not, by the first Trump vs Biden debate -- which airs Sept. 29, if you can bear to watch.

Follow Bloomberg's Emily Barrett on Twitter at @notthatECB

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