Asian equities signal more gains as reporting season kicks off, Trump says the U.S. is open to meeting with North Korea, and Steve Bannon says sorry. Here are some of the things people in markets are talking about.
North and South Korea Set to Meet… With Trump?
With North and South Korea set to talk for the first time in two years Tuesday, U.S. President Donald Trump has signaled he’s open to joining the discussions “at the appropriate time” . The Asian neighbors are ostensibly meeting to talk about North Korea attending next month’s Winter Olympics in Pyeongchang, a city about 50 miles (80 kilometers) from the border dividing the Korean Peninsula. But the discussions also represent the best chance to resurrect negotiations over North Korea’s nuclear weapons program since Trump took office. “Right now, they’re talking Olympics. It’s a start. It’s a big start,” Trump said at a news conference at Camp David over the weekend. Asked whether he’d be open to speaking directly with North Korean leader Kim Jong Un — who the U.S. President has previously called “little rocket man” — Trump responded, “Sure, I always believe in talking.”
Bannon Says Sorry
Former White House chief strategist Steve Bannon has apologized to the President and his family over comments in an explosive new book that has raised doubts about the former real estate developer’s fitness for office. Comments attributed to Bannon in Michael Wolff’s book “Fire and Fury: Inside the Trump White House” describe Donald Trump Jr .’s meeting with Russian nationals to collect damaging information about Democrat Hillary Clinton as “treasonous” and “unpatriotic.” In a lengthy statement provided to the political website Axios, Bannon said Trump’s son “is both a patriot and a good man” and added that his comments had been directed at Paul Manafort, the President’s campaign manager at the time of the meeting, and not Trump Jr. Allies of Trump Sr. have come out in force to defend the President in the days since the book’s assertions first came to light.
The World’s Largest Foreign-Currency Stockpile
China’s foreign-exchange reserves increased for an 11th straight month in December, according to a People’s Bank of China statement on Sunday, climbing $20.7 billion to $3.14 trillion in December, bringing the full-year increase to $129 billion. The data capped a year of recovery amid tighter capital controls, a stronger yuan and resilient economic growth. The world’s largest foreign currency stockpile fell below $3 trillion for the first time in almost six years at the start of 2017 after the central bank propped up the yuan. But in the months since, the currency has come roaring back. Authorities are keeping a tight grip on money flowing out of the country and full-year economic growth is set to pick up, although the economy begins 2018 facing what its own leaders call three years of “critical battles.”
Things Are Still Looking Up for Equities
Australian and Hong Kong equity futures are signaling more gains on Monday after stocks worldwide extended their stellar start to 2018 last week. U.S. equities posted the biggest weekly gain in a year, while benchmark indexes in Japan, South Korea and China were among Asia’s gainers last week and emerging-market stocks reached the highest since 2011. Analysts see Asia’s earnings season boosting the region’s equities even further: profit estimates for all sectors were increased over the last three months of 2017, according to data compiled by Bloomberg. Asian companies reporting this week include Samsung Electronics Co. and a slew of Japanese retailers and manufacturers, although Japan’s markets are closed Monday for a public holiday.
Monday’s highlights are Taiwan trade data and foreign exchange reserves for Singapore and Indonesia. Tuesday brings Japanese cash earnings and consumer confidence, along with Australian building permits and job ads (and it’s Samsung earnings day in Seoul). Wednesday features South Korean unemployment and money supply, Aussie job vacancies and Chinese inflation — PPI and CPI. Thursday has New Zealand data on house prices and job ads, while Australia details retail sales and Malaysia reports industrial production. Friday rounds out the week with N.Z. building permits, Japan’s balance of payments, Australian credit card purchases, Singapore retail sales and Indian CPI. In Europe, Monday brings German factory orders, U.K. house prices and EU consumer confidence and retail sales, while in the U.S. there’ll be consumer credit data.
And finally, here’s what David’s interested in this morning
Apart from rich stock valuations and higher interest rates, there are also two major forces set for a collision course this year. In one corner, we have strong emerging-market currencies. Across the ring is stellar global export growth. As an example, South Korea’s cumulative current account surplus in the five months to November was over $45 billion. That’s partly why demand for the Korean won and its peers is on the up. Equally it underscores the net earnings revisions we’ve seen and why equity investors have been massive net buyers in those markets. A lot of these currencies (I’m looking at you Taiwanese dollar, Thai baht and Malaysian ringgit) are pushing three- to four-year highs against the dollar, so it shouldn’t come as any surprise if policy makers are discussing options.
Some would point out that everything’s up against the dollar anyway, so that takes the sting out of the punches. That’s true. But it doesn’t do as much in terms of the foreign-exchange hit to profits when reporting season comes around. This is a development to watch over the next few months. Strong currencies and export growth generally can’t coexist for very long. Finally, it’s also worth revisiting the widely-accepted assumptionthat dollar weakness persists.