Broad Commitment to a Process Signed by Trump and Kim but Lacking Many Details

June 12, 2018

There’s been little market reaction to the Trump-Kim talks in Singapore.

  • The dollar is up 0.2% versus the yen and loonie, unchanged against the yuan and Aussie dollar, and down 0.1% vis-a-vis the euro, Swiss franc, kiwi, and sterling.
  • Equities advanced 0.9% in China, 0.6% in India and Hong Kong, and 0.4% in Japan. Stocks fell 0.3% in Singapore, and 0.1% in South Korea, and closed unchanged in Taiwan.
  • While embracing a new relationship with North Korea, President Trump tweeted more complaints against historic allies in Europe and Canada, and European share prices have traded down 0.3% in the U.K., and 0.2% in France but up 0.5% in Italy and 0.3% in Spain. The German Dax is unchanged.
  • 10-year sovereign debt yields fell 5 basis points in Greece and 3 bps in Italy but have risen 2 bps in The Netherlands, Switzerland, Germany, Japan, and France.
  • WTI oil and Comex gold are respectively 0.3% and 0.1% softer.

The brief document signed by Trump and Kim stops joint U.S. military exercises with South Korea but not U.S. economic sanctions against the North. The North has agreed to dismantle its nuclear weapons, but there’s no timetable or means for verifying that process yet in place. More talks between high officials in the U.S. and North Korea are to follow without details regarding whom and when.

The German ZEW Institute released its monthly indices of investor sentiment toward Germany and the whole euro area economy, and such reveals a considerable drop in confidence about the 6-month outlook in both caused by trade tensions with the U.S., the ascent to power of populists in Italy, and recent weaker trends in German exports, industrial output, and demand. The German expectations index fell to a June reading of -16.1 from May’s score of -8.2 and +17.4 back in January. Expectations regarding Euroland printed at negative 12.6 in the latest month versus +2.4 in May and +31.8 last January. The indices for current conditions dropped in June by 6.8 points in Germany’s case and by 16.2 points in Euroland’s.

Japan’s tertiary index, a measure of service sector activity, which had dipped 0.1% in the first quarter, rebounded 1.0% in April, lifting its year-on-year advance by a half percentage point to 1.4%.

Japanese producer prices for goods jumped 0.6% on month in May, lifting the 12-month rate of increase to a 4-month high of 2.7% from 2.1% in both March and April.

The Japanese Ministry of Finance’s quarterly survey of business confidence revealed an unexpected swing among manufacturers from 2.9 in the first quarter to -3.2 in 2Q, but a sharp improvement is foreseen in the second half of calendar 2018.

Chinese bank lending of 1.15 trillion yuan in May and on-year M2 money growth that month were close to analyst expectations.

The National Australia Bank’s monthly measures of Aussie business confidence and business conditions respectively settled back in May by 5 points to a reading of +6 and by 6 points to a reading of +15. A separate release showed home loans in Australia, which had contracted in each month of the first quarter, dropping an additional 1.4% between March and April.

The monthly batch of British labor statistics revealed

  • A 7.7K decline in jobless insurance claims during May.
  • Marginally slower on-year wage growth in April of 2.5% including bonus pay and 2.8% excluding such.
  • And an unchanged ILO-basis jobless rate in February-April of 4.2%.

Italian industrial production fell 1.2% in April but was 1.9% higher than a year earlier. French nonfarm payroll jobs rose 0.2% in the second quarter.

U.S. small business sentiment leaped to a record high reading of 107.8 in May from 104.6 in April.

U.S. consumer price and real hourly earnings data are due very shortly.

Next big market focus turns to tomorrow’s FOMC decision and press conference followed by central bank decisions from the ECB on Thursday and Bank of Japan on Friday.

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

Tags: ,


Comments are closed.