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La Bourse de New York a ouvert vendredi en baisse dans la foulée de la séance de la veille après le relèvement largement anticipé des taux d'intérêt mercredi par la Réserve fédérale. La séance pourrait être marquée par une volatilité accrue en cette journée des "quatre sorcières", lorsque plusieurs contrats d'options et de futures sur indices et actions expirent. Le Dow Jones perd 0,83% dans les premiers échanges, le Standard & Poor's 500 recule de 0,68% et le Nasdaq Composite cède 0,37%. /Photo prise le 17 décembre 2015/REUTERS/Lucas Jackson

The U.S. readies for trade with North Korea

The U.S. readies for trade with North Korea


The U.S. is considering allowing investments if North Korea gives up its nuclear ambitions, Trump throws a lifeline to beleaguered Chinese firm ZTE in reversal, and Malaysian markets will be in focus as they reopen after Mahathir’s stunning victory. Here are some of the things people in markets are talking about.

North Korea Investments

The U.S. is ready to allow investments in North Korea once it has verifiable proof of the Asian nation’s denuclearization, two of President Donald Trump’s top national security officialssaid. Security Adviser John Bolton said on ABC’s “This Week” that the U.S. was prepared to open trade and investment with North Korea as soon as it can. Secretary of State Mike Pompeo,  in an interview on CBS, talked of the potential for U.S. investment in the North Asian nation from America’s “entrepreneurs, our risk takers, our capital providers.” Before any such benefits flow, though, Bolton and Pompeo said the U.S. must have proof that the denuclearization process is complete, verifiable, and irreversible. The remarks come ahead of a historic summit between Trump and Kim in Singapore on June 12 that may pave the way for the North Korean dictator to give up his nuclear arsenal.

ZTE Lifeline

In a major reversal for a president who has many times accused China of stealing U.S. jobs, Donald Trump ordered the U.S. Commerce Department to get ZTE Corp. back into business, weeks after cutting off the massive Chinese telecom equipment maker from its U.S. suppliers with a condemnation of ZTE’s “egregious” behavior. Trump said in a Sunday morning tweet that he and Chinese leader Xi Jinping are working together to give ZTE “a way to get back into business, fast.’’  The U.S. blockade has choked off the revenue of the No. 2 Chinese telecom company, which  regards the next two weeks as crucial as it faces potential collapse. The firm said May 10 it’s suspended all major operations. Its shares stopped trading in Hong Kong last month.

Coming Up…

Malaysian assets are due to reopen on Monday with Mahathir Mohamad keen to try and reassure investors after his shock election victory.  He said the king is willing to pardon Anwar Ibrahim — who would then at some stage take over from Mahathir as prime minister. The prospect of 70-year-old Anwar might offer more long-term stability than having 92-year-old Mahathir heading up the day-to-day governing of the country.  Elsewhere in Asia, China’s monthly activity data are likely to paint a mixed picture, with factory output picking up but growth in consumption steady and fixed-asset investment edging down. Japan may report a ninth straight quarter of economic growth, though slower than in the fourth quarter. Malaysia and Singapore GDP are also due, as are India’s CPI and trade. Australia reports GDP on Thursday.  U.S. retail sales and industrial production for April will give early signals about the strength of the U.S. economy in the second quarter. Trade and geopolitical tensions will remain in focus with the U.S. planning top open its embassy in Jerusalem on Monday and China Vice Premier Liu He expected in Washington on Tuesday for trade talks.

Mixed Open

Asian equity futures pointed to a mixed open to kick off the week. U.S. stocks edged higher on Friday,  capping their best week in two months amid growing conviction that inflation will remain tame and as trade tensions eased. The dollar steadied, while 10-year Treasury yields held below 3 percent. Precious metals were down across the board, and aluminum dropped 2 percent. Bitcoin fell 5 percent. Of particular focus for markets this week will be the U.S. yield curve. St. Louis Fed Chief James Bullard predicted inversion may happen later this year or in 2019 if the Fed keeps up its pace of raising rates. Any hints from Fed speakers this week that inversion may lead to slower increases could spur another bout of bull steepening.

1MDB Haunts Najib

Only three days after 92-year-old Mahathir Mohamad secured a shocking election win, he barred predecessor Najib Razak from leaving Malaysia and said he’d reopen a graft probe targeting state fund 1MDB. He also said he was replacing the attorney-general who cleared Najib and instructed the auditor-general to declassify a 1MDB report that was protected by the Official Secrets Act.  Razak worked hard to keep the public from accessing information about a multi-billion dollar scandal at the fund. Najib has long denied any wrongdoing and aggressively hit back at detractors after 2015 revelations that around $700 million — alleged to be 1MDB funds — appeared in his personal accounts before the prior election in 2013.

What we’ve been reading

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

And finally, here’s what Chris is interested in this morning

The recent rise in crude oil prices above $70 a barrel may be due a breather, even as geopolitical tensions simmer around the energy-rich Middle East. West Texas oil futures have risen almost 20 percent so far this year and are up about 4 percent this month after U.S. President Donald Trump’s decision to exit the Iranian nuclear accord and reimpose sanctions on OPEC’s third-biggest producer. For many in the market, the medium-term outlook for oil prices is higher, as demand remains robust and supply constrained. UBS Group AG lifted its six-month Brent crude forecast to $80 a barrel and Bank of America Merrill Lynch said prices may rise to $100 next year. Still, a number of factors point to a pause in the rally, if only in the short-term.

Firstly and perhaps most unusually, oil prices have been rising as the dollar has strengthened, a relationship that more often works the other way. A stronger dollar makes oil more expensive for those countries whose currencies have weakened, which may put some pressure on near-term demand. Secondly, speculative positioning on oil futures is already bullish and at elevated levels. This is often a contrarian indicator — when traders take profits on their winning bets, it puts downward pressure on prices. Finally, in the wake of the Iran sanctions, a number of OPEC members — including Saudi Arabia and Kuwait — have pledged to mitigate their effect, essentially promising to stabilize supply. The oil rally may have plenty in the tank to keep the uptrend going, but a pause to refuel might be as likely, at least in the short-term.

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