Little Market Reaction to Trump’s Decision to Call Off Summit with Kim

May 25, 2018

Markets have taken President Trump’s decision not to meet Jung Un Kim in Singapore on June 12 surprisingly calmly. North Korean official did not escalate the disagreement, indicating instead a continuing interest for Trump and Kim to meet.

The biggest market developments the Friday have been

  • A 1.8% drop in WTI crude oil to $69.46 per barrel. Saudi Arabia apparently plans stronger production later this year.
  • A widening of long-term interest rate spreads among euro area members, with 10-year German bunds falling 3 basis points but comparable sovereign debt yields rising by 6 bps in Spain and Italy and 4 bps in Greece and Portugal.

The 10-year Treasury yield slipped further below 3.0% to 2.96%, and the 10-year British gilt and Japanese JGB yields are down by 2 and 1 basis points.

The dollar is little changed, firming overnight just 0.2% against the yen, kiwi, and sterling and by 0.1% relative to the euro, yuan and Swiss franc but slipping 0.2% against the loonie and 0.4% versus the peso. The Swiss franc is unchanged on balance.

Share prices in the Pacific Rim rose 1.0% in India, 0.6% in New Zealand, 0.5% in Indonesia and 0.1% in Japan and Taiwan, while Hong Kong, China, Singapore, South Korea and Australian markets saw losses of 0.6%, 0.4%, 0.4%, 0.2%, and 0.1%. equities in Europe have risen so far by 1.0% in Germany, 0.6% in France and 0.2% in the U.K. but show losses of 0.8% in Spain and 0.2% in Italy.

Gold edged 0.1% higher to $1,310.70 per ounce.

The U.S. and British markets will be closed Monday for Memorial Day and the late spring bank holiday.

For the first time since last November, Germany’s business climate index did not decline in May but rather matched the April reading of 102.2. IFO Institute officials, commenting on the latest findings of this proprietary economic indicators, said that “the German economic is performing well in a difficult international situation.” At 102.2, the business climate index is down from 105.2 six months earlier but still a shade above the May 2017 reading of 101.8.

The preliminary estimate of British GDP growth last quarter, a 0.1% uptick versus 4Q17 and an on-year advance of 1.2%, matched the flash indication. Exports (down 0.5%) and imports (-0.6%) each contracted unexpectedly, and total business investment (-0.2%) also lost ground. Personal consumption growth slowed to just 0.2%. In the previous year through 1Q17, real GDP had climbed 2.1%.

According to the British Bankers Association, mortgage applications in April totaled 38,048, 1.2% greater than in March.

Spanish producer price inflation accelerated 0.6 percentage points to 1.9% in April.

Tokyo consumer price inflation, both headline total and core, eased a tenth of a percentage point in May.

Industrial production in Singapore rose just 0.2% in April but was still a robust 9.1% greater than a year earlier.

Scheduled U.S. data releases today are durable goods orders and the U. Michigan/Reuters consumer sentiment index. Several Fed officials including Chairman Powell and Evans, Kaplan and Bostic speak publicly today.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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