|A second Trump-Kim summit is in the works. The turmoil in emerging markets continues, and crypto currencies extend their plunge. Here are some of the things people in markets are talking about.
North Korean leader Kim Jong Un requested a second meeting with President Donald Trump, and U.S. diplomats are already working to set up the summit, White House Press Secretary Sarah Huckabee Sanders said Monday. “The primary purpose of the letter was to request and look to schedule another meeting with the president, which we are open to and are already in the process of coordinating,” Sanders said. She described the document as “a very warm, very positive letter.” The request is the latest direct communication between the two leaders, who held a summit in Singapore in June and agreed that North Korea would abandon its nuclear weapons program. But Kim’s regime has since shown little sign it’s moving toward denuclearization.
Emerging Markets Poised for More Pain
Emerging-market currencies slumped to their lowest level since April 2017 on speculation the U.S.-China trade war will escalate, and Goldman Sachs said its models signal further declines for some developing nations. While this year’s sell-off has pushed emerging-market exchange rates into undervalued territory by some measures, the Colombian peso, Indian rupee and Indonesian rupiah remain modestly overvalued according to a model that takes into account the external and internal imbalances of the nations’ economies. Emerging-market shares also had a rough session Monday, falling more than 1 percent. The $4.5 trillion sell-off that has taken the MSCI Emerging Markets Index below its 20-year average valuation — normally a signal for investors to return — has further to run before reaching the point where four major turnarounds in the past 20 years began, technical patterns suggest. Asian stocks are set for a mixed start Tuesday.
India Ripe for Tech M&A Boom
India’s technology industry will see more billion-dollar acquisitions as the next big battleground for foreign Internet companies, according to boutique advisory firm Raine Group. The e-commerce, financial technology and emerging media sectors will see strong deal activity, said Gaurav Mehta, the Mumbai-based country head at Raine, which advised on India’s two biggest tech deals this year. Companies have also started to see the logic of consolidation even in high-growth markets like India, Mehta said in an interview last month. Walmart agreed in May to buy control of Flipkart Online Services for $16 billion in the world’s biggest e-commerce takeover this year. Last month, billionaire Warren Buffett’s Berkshire Hathaway agreed to invest in the owner of Indian digital payments leader Paytm.
Crypto Bear Market Deepens
The cryptocurrency bear market plumbed a fresh 10-month low on Monday as Bitcoin’s biggest rival tumbled and U.S. regulators suspended trading in two securities linked to digital assets. Ether, the second-largest virtual currency, slumped 11 percent from its level at 5 p.m. New York time on Friday, according to Bloomberg composite pricing. Bitcoin declined 2.4 percent, while the market capitalization of digital assets tracked by CoinMarketCap.com shrank to about $197 billion — down almost $640 billion from its January peak.
European Union chief Brexit negotiator Michel Barnier once again struck an optimistic tone as he said a deal on the U.K.’s orderly withdrawal from the bloc is possible within eight weeks, fueling a rally in the pound. Barnier told a conference on Monday in Bled, Slovenia, that it was “realistic” and “possible” to get an agreement by the start of November to allow time for the deal to be approved by the British and European parliaments. Still, he warned that several issues, including the contentious matter of the Irish border, need to be resolved. Barnier’s remarks are the latest in a series of more positive sounds from the EU side on the state of the negotiations. “I think it’s possible” to get a deal by the start of November, Barnier said at the conference. “We are not far from agreement.”
What we’ve been reading
This is what caught our eye over the last 24 hours.
And finally, here’s what David’s interested in this morning
Brent crude’s been pushing back toward 2014 highs again. Prices have rallied about 10 percent from the August bottom. The past three-week stretch has also seen a further strengthening in the U.S. dollar, and apart from the Thai baht and the Chinese yuan, all emerging Asian currencies have been hit to varying degrees. That’s bad news for the Philippines and India. Both have inflation issues. Both are net importers of energy. Effectively, both are buying oil at incrementally more expensive levels.
What’s happening right now will only show up in inflation reports that come out in October and November, so the inflation conversation is not going away any time soon. As I write this, USD-INR just cut through 72.30 and USD-PHP is flirting with 54. The Philippine treasury rejected some bids in its auction yesterday as rates push up. Unsurprisingly, the two countries’ central banks are expected to push rates up the most in the Asia-Pacific region over these next three months.