Today's Headlines
Bloomberg:
- Without Oil, North Korea Sanctions Won't Stop Kim. (video) For North Korea’s fledgling economy, the latest round of sanctions will cut deep. The curbs on everything from lead and fish exports to shady North Korean companies coincide with a deadly drought that’s ruining crops, darkening an already dire humanitarian picture. An estimated 40 percent of the population is already under nourished and two-thirds are reliant on food aid, according to estimates by the United Nations Food and Agricultural Organization and the World Food Programme. Rajiv Biswas, Asia-Pacific chief economist at IHS Markit in Singapore, expects a "severe recession" this year as sanctions crimp the mining and manufacturing industries, which together make up 33 percent of North Korea’s output.
- China's Xi Grapples With Rising Cost of Supporting Kim Jong Un. It’s getting harder for Chinese President Xi Jinping to maintain support for wayward ally North Korea. For weeks, Xi has been caught in the middle as leader Kim Jong Un lobbed intercontinental ballistic missiles into the Sea of Japan and U.S. President Donald Trump vented his frustration with warnings of “fire and fury.” China has urged calm while backing tighter sanctions against North Korea to ward off U.S. threats of punitive tariffs and military strikes.
- Either China's Bond Market Or Commodities Are Getting It Wrong. China’s surging commodity prices are sending a warning signal on inflation. That should be negative for bonds, but the debt market seems unruffled. As futures on steel reinforcement bars surged to their highest level since 2013 in Shanghai last week, joining copper and aluminum at multi-year highs, bonds barely registered. A Bank of America index of the Chinese debt market was little changed, continuing a trend that’s left it steady in the quarter, even as commodity prices look to be stirring.
- Taming of Asia's Most Volatile Currencies Is Creating New Danger. Policy makers in Indonesia and Malaysia have been so successful in quashing currency volatility that this is breeding a new danger: complacency. Traders are being deprived of the experience to cope when fluctuations inevitably return, according to PT Bank OCBC NISP in Jakarta. At the same time, companies may cut back on hedging, exposing themselves to potential losses, says PT Sinarmas Sekuritas. Three-month historical volatility for Indonesia’s rupiah has slumped for four straight quarters, falling to a four-year low of 2.53 percent in May from as high as 16 percent in 2013. Ringgit volatility has shrunk by two thirds this year to 2.95 percent. The two currencies were previously the most volatile in Asia -- now they are the least after China’s yuan.
- Draghi Unfazed About the Strength of the Euro. Libya’s biggest oil field has reduced crude production by more than 30 percent in recent days and the Zueitina export terminal ceased loadings over the weekend, throwing the OPEC country’s output back on a downward spiral.
- Havens Strong on Korea Tension, Dollar Weak on CPI. The yen and gold held on to their recent haven-driven gains despite efforts from U.S. officials to tamp down fears of imminent nuclear war with North Korea. Asian equities looked set to stem recent losses, while Japanese stock traders returned from holidays facing more declines. Futures indicated a flat start in Sydney, while those in Hong Kong were up in most recent trading after the S&P 500 Index closed higher on Friday and contracts on U.S. indexes gained further on Monday. The yen was up 0.1 percent against the dollar, heading higher for a fifth day. Bitcoin rose in early Asian trading, and is now up 20 percent since Wednesday.
- Bond Market Looks Expensive, Until You Factor in Threat of War. The bond bulls in the $14 trillion Treasuries market didn’t expect -- or want -- to be proven right in quite this manner. Ramped-up bellicose rhetoric between U.S. President Donald Trump and North Korean leader Kim Jong Un has stoked fears of imminent war, driving 10-year Treasury yields to the lowest level since June. Unless the two adversaries tone it down, haven demand is likely to overwhelm traders this week, with few economic data releases significant enough to move markets.
Wall Street Journal:
- White House Says Trump Condemns Extremist Groups. Statement comes a day after the president blamed ‘many sides’ for Charlottesville violence.
- Top U.S. General Readies Military Plan for North Korea, but Pushes for Diplomacy. Arriving in Asia, Gen. Joe Dunford says he is prepared for war, but supporting Secretary of State Rex Tillerson’s efforts.
- Dollar Weakness Could Provide Just the Boost the Sluggish U.S. Economy Needs. Currency’s slide since January has near-term upsides for manufacturers, multinationals and the Fed.
- Trump Chips Away at Postcrisis Wall Street Rules. Plan to restrict bonuses has been dropped, and some limits on banks’ trading are under review.
Fox News:
CNBC:
Zero Hedge:
Business Insider:
Night Trading
- Asian indices are -1.25% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 88.50 +3.5 basis points.
- Asia Pacific Sovereign CDS Index 21.75 +.75 basis point.
- Bloomberg Emerging Markets Currency Index 73.62 unch.
- S&P 500 futures +.25%.
- NASDAQ 100 futures +.32%.
Earnings of Note
Company/Estimate
- (JD)/.58
- (SYY)/.72
- (CSIQ)/-.25
Economic Releases
- None of note.
- (TAL) 6-for-1
- The China Retail Sales report and the Eurozone Industrial Production report could also impact trading today.
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