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Mural com notas de dólar norte-americano no lado de fora de uma casa de câmbio em Nairóbi, no Quênia. 23/07/2015 REUTERS/Thomas Mukoya

North Korea shatters the (relative) calm

North Korea launches an inter-continental ballistic missile, political progress on both sides of the Atlantic, and stocks surge. Here are some of the things people in markets are talking about.

North Korean Fires ICBM

While most in Asia were asleep, North Korea fired a ballistic missile in its first provocation since U.S. President Donald Trump labeled the country a state sponsor of terrorism earlier this month. The news briefly spurred haven bids. The U.S. and Japan said the projectile was fired from North Korea’s west coast at a lofted trajectory before landing in the Sea of Japan. North Korea has launched more than a dozen missilesthis year as Kim Jong Un’s regime seeks the capability to hit the continental U.S. with a nuclear weapon. Still, the launch shatters a two-month period of relative quiet that had led to a softer tone from top U.S. officials including Trump and Secretary of State Rex Tillerson.

Political Progress

Long awaited progress on the political front was made Tuesday in both the U.S. and the U.K., boosting the dollar and pound. In Washington, the Senate Budget Committee voted 12-11, on party lines, to send the Republican Senate tax bill to the floor Tuesday — a vote that may set the stage for handing President Donald Trump a signature legislative victory. Across the Atlantic, U.K. and European Union negotiators have reached an outline deal on the divorce bill that Britain will pay when it leaves the bloc, the Telegraph reported, clearing a hurdle in talks and leaving the thorny issue of the Irish border as the last major obstacle.

Still, U.S. Government Shutdown Looms Large

The top two Democratic leaders in Congress pulled out of a meeting with the president following a tweet that a budget deal was unlikely, raising the odds that the U.S. government will partially shut down next week. House Minority Leader Nancy Pelosi and Senate Minority Leader Chuck Schumer said they’d skip a “show meeting” at the White House that was scheduled for 3 p.m. New York time on Tuesday and instead ask for a meeting with their Republican counterparts, House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell. If the two parties don’t reach a deal on spending by Dec. 8, the federal government could face a partial shutdown.

Stocks Surge

U.S. benchmark stock indexes rose to records as Treasuries slid and the dollar gained for a second day. Shares in Alcoa Corp. and Century Aluminum Co. jumped after the Trump administration, invoking powers the U.S. hasn’t used in more than a quarter century, began a probe into Chinese aluminum imports that could lead to tariffs. In commodities, copper slid the most in two weeks, while West Texas crude traded below $58 a barrel after touching the highest level in more than two years before OPEC and its allies meet this week. Asian traders may be able to regard the recent stocks correction with some sang froid — after all the MSCI Asia-Pacific Index is still heading for an 11th-straight month of gains and its best annual advance since 2009. That’s even amid some concerns that China’s efforts to manage its way toward slower, steadier growth are delivering plenty of pain to its stock and bond markets. Equity futures are flashing a sea of green ahead of the Asia open.

Coming Up

There’s little coming Wednesday in Asia to divert markets as we wait for U.S. GDP data and Yellen’s testimony, while looking forward to China PMIs on Thursday and FridayWednesday will also bring U.S. pending home sales, euro-area economic confidence, German CPI, French GDP and earnings from Royal Bank of Canada, Lukoil and Tiffany & Co. French President Emmanuel Macron and German Chancellor Angela Merkel are set to attend a European Union-Africa summit in Ivory Coast, while San Francisco Fed President John Williams will give a keynote speech to the 54th annual Economic Forecast Luncheon in Phoenix, Arizona.

 

And finally, here’s what David’s interested in this morning

 

The next 3 days will be crazy jam-packed with arguably the most critical set of regional data this year. We get GDP reports in South Korea and India, inflation and jobs in Japan, building approvals in Australia and perhaps most crucial will be the forward-looking manufacturing PMIs in China. On top of the size of the economies they reflect on, what also makes this upcoming set compelling is timing.

South Korea’s GDP print, out on Friday, will hopefully justify the Bank of Korea’s likely first rate hike since 2010 22 hours before. The Indian growth metric, out on Thursday, might just bolster the minority view the RBI cuts rates again this time next week. Australia’s, due out this time tomorrow, will give us an early sniff of when the housing market hangover starts to kick in. Japan’s will likely underscore why the Bank of Japan is seen printing money all the way until the 2020 Olympics. And China’s will hopefully signal stability after rising corporate bond yields has reawakened the China bearspost-Halloween. In the case of Asia, data has recently started to turn, or — in the case of China — has just really failed to impress overall.

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