Stock markets were underpinned

12 June, 2018

Asian Market Wrap: Core yields moved higher and stock markets were underpinned as Trump tweeted enthusiastically about the summit with North Korea’s leader. The G7 turbulence was quickly shrugged off yesterday as the focus turned to Trump/Kim meeting, which will be followed by three key central bank meetings this week. 10-year Treasury yields are up 0.6 bp at 2.957%, 10-year JGB yields rose 0.5 bp to 0.042%, Stock markets moved mostly higher across Asia with Topix and Nikkei up 0.40% and 0.44% respectively with a weaker yen adding support. Hang Seng and CSI 300 are up 0.48% and 0.39% so far, the ASX rose 0.15%. with a stronger currency weighing. US futures are also in the green, oil prices are up and the WTI is trading at USD 66.24 per barrel.

FX Action: The dollar traded moderately firmer heading into the London interbank open, led by a 0.3% gain in USDJPY, which logged a three-week high just shy of 110.50. Yen crosses also firmed up, reflecting broader softness in the yen as safe haven premiums unwound amid a caution sense of optimism in global markets about the Trump-Kim summit, which has just ended. The summit produced a joint signing of an “important document,” though details about its content have not, so far, been made available. The summit produced images of cordiality and rhetoric (and tweets) of optimism — rhetoric emphasizing historical turning points and of new relationships and prospects for peace etc. Whether Kim it turns out that actually committed to team Trump’s demands for full and verifiable commitment to denuclearization remains to be seen, but, if he didn’t, whatever baby-step towards this grand goal Kim has offered looks to have been satisfactory to Trump. Assuming things remain upbeat, and global stock market direction remains tilted upwards, the yen would likely remain on a softening path, and USDJPY on a firming path. Among other pairings, EURUSD dipped to a two-session low of 1.1742 in the wake of the Tokyo fix before settling around 1.1770. Cable, which took a hit yesterday from big misses in UK production and trade data, posted a one-week low of 1.3341.

Main Macro Events Today

  • UK Average Earnings – Expectations –ex-bonus average income to rise by 2.9% y/y in the three months to April, which would be unchanged form the March figure and affirm continued above-inflation pay growth.
  • UK Unemployment Data – Expectations – at the 4.2% multi-decade low.
  • German ZEW Economic Sentiment – Expectations – falling back to -14.0 from -8.2, with the number of those pessimistic about the outlook rising steadily.
  • US CPI and Core – Expectations – CPI is expected to rise 0.2% for May, following a similar gain in April. Core prices are estimated to rise 0.2% as well after a tepid 0.1% April reading.

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