The Trump-Kim summit is set
|Trump announces the date and time for his meeting with Kim Jong Un. And a tepid inflation report boosts U.S. stocks to the highest in seven weeks. Here are some of the things people in markets are talking about.
The Summit Date is Set
U.S. President Donald Trump said he will meet North Korean leader Kim Jong Un on June 12 in Singapore, locking in a historic summit between the two leaders amid their confrontation over Pyongyang’s nuclear weapons program. “We will both try to make it a very special moment for World Peace!” Trump said in a Twitter message Thursday announcing the date and place of the long-anticipated talks, just hours after the arrival in Washington of three U.S. citizens who had been imprisoned in North Korea.
Tepid Inflation Boosts Shares, Hits Dollar
Asian stocks are set for a slightly higher open after their U.S. counterparts rallied to the highest in seven weeks. The dollar retreated after a weak inflation reading signaled the Federal Reserve won’t need to step up the pace of interest-rate increases. A gauge of small-cap stocks set an intraday record and emerging-market shares rallied on the more-favorable outlook for global borrowing costs. The dollar fell the most since March, lifting commodities. U.S. consumer pricesrose by less than forecast in April as costs for automobiles and airfares declined. Inflation looked even more tame if you remove housing costs.
Mahathir Pledges Stock Market Boost
Mahathir Mohamad said he’d lead a business-friendly administration and seek ways to boost Malaysia’s stock market in his first remarks after being sworn in as prime minister. In a late-night briefing on Thursday, the 92-year-old politician said he’d focus on growing the economy and reducing debt, adding that some terms may need to be renegotiated. He said Malaysia would seek friendly ties with other countries as a trading nation.
Shorting China to Get Easier
Short selling could get a little bit easier in China after the country’s domestic stocks join MSCI Inc.’s big index club. MSCI’s inclusion of onshore-listed Chinese shares next month will be a step toward increasing the pool of stock that’s available to borrow. Share lending in the country is virtually non-existent, compared to the U.S. or Europe where the practice often makes up about 20 percent of daily turnover. In just a few weeks, some $1.9 trillion of index-tracking money linked to MSCI is about to own equities in China for the first time.
An eventful week may close with a whimper with little in the way of key data expected Friday. Second-tier reports including Aussie home loans, Singapore retail sales and Hong Kong GDP are on tap. The MSCI Asia-Pacific index is set for its biggest weekly gain in a month, while bond traders will be watching Australia 10-year yields to see just how much further below Treasuries they can go.
What we’ve been reading
This is what’s caught our eye over the last 24 hours.
And finally, here’s what David’s interested in this morning
So the past three weeks has seen the knock to emerging markets spread like slow and destructive lava. The extreme case is Argentina (where do you want to start?). But recently it’s spread nearby with the Uruguayan, Colombian, Mexican and Chilean pesos wobbling midweek. Eastern Europe’s been a stress point, with yields in Poland, Hungary, Romania and Turkey scaling higher. Here in Asia, Indonesia’s been nailed the hardest. If you had told me this time last month the 2-year yield (then at 5.5 percent) would be at 7 percent by now, I’d have the crazy police knocking on your door. Well guess what? We’re knocking at the door of 7 percent — just 20 bps to go.
Our conversations on the shows seem to keep coming back to the toxic cocktail that simultaneous oil and dollar rallies has created. Expensive oil hits at what matters most in a world of rising U.S. rates — current account deficits. Well-respected energy voice Fereidun Fesharaki sees $90-100 ahead. The market is already super tight and if you remove Iranian oil plus something else kicking off in the region, he says that level is easy work. As for the dollar, bulls point to the chart below. Theoretically, we’re just a hike away from real rates in the U.S. turning positive. At that point, we’ll really get to see whether these much-touted reserve buffers are indeed enough to scare the EM boogie man back in the closet. Here we go.