Want to receive this post in your inbox every morning? Sign up here.
North Korea tests a nuclear warhead, Gundlach calls a bottom in bond yields, and equity markets slip. Here are some of the things people in markets are talking about today.
North Korean nuke
North Korea tested its fifth nuclear device overnight, with the government's news agency saying the detonation showed the regime now has the ability to attach atomic warheads to missiles. China, the only major country to back the isolated nation, called on it to curb its nuclear plans in the wake of the test. While stock and currency markets in South Korea's capital dropped following the blast, investors, from past experience, suspect the pullback will be temporary.
Gundlach, bond bear
DoubleLine Capital Chief Investment Officer Jeffrey Gundlach recommends that fixed-income investors prepare for higher inflation and higher bonds yields, saying “this is a big, big moment,” in a webcast yesterday. There are some signs in the market that he may be right, this time, as Japan's sovereign debt is suffering its worst rout in 13 years. The corporate bond market doesn't seem to have got the memo yet, as sales for the year have passed $1 trillion quicker than ever, with this week set to be the best since May for issuance.
The EU fightback
European Union leaders are preparing for a summit in Bratislava on Sept. 16 — the first that will not be attended by the U.K. since it joined in 1973 — with a series of meetings aimed at renewing commitment to the union in the aftermath of the Brexit vote. U.K. Chancellor of the Exchequer Philip Hammond has warned European governments that they risk damaging their own economies if they push for a reduction in London's financial clout. A CEO in the U.K. capital is pushing for a timetable on Brexit negotiations in order to relieve some of the uncertainty for London-based financial institutions.
Overnight, the MSCI Asia Pacific Index dropped 0.9 percent, with South Korea’s Kospi index closing 1.3 percent lower in the wake of the North's nuclear test. In Europe, the Stoxx 600 Index was 0.4 percent lower at 6:12 a.m. ET as a Bank of America Corp. report showed fund managers withdrew money from the region’s equity funds for a 31st straight week. S&P 500 futures were down 0.2 percent.
A barrel of West Texas Intermediate for October delivery was trading at $46.98 at 6:19 a.m. ET as investors put yesterday's biggest U.S. stockpile slump in 17 years down as a one-off event caused by disruptions from the tropical storm Hermine disruptions. While oil has been range-bound for months, coking coal, used in steel production, has been staging a strong rally, with prices rising 9.5 percent yesterday, a move that should help the bottom line of BHP Billiton Ltd., a major producer of the commodity.
What we've been reading
This is what's caught our eye over the last 24 hours.
- China is reviving the American heartland - one low wage at a time.
- Will the Clinton-Trump debate be the 'nastiest' ever?
- Fed urges ban on Wall Street buying stakes in companies.
- Elon Musk calls SpaceX explosion the most vexing failure in 14 years.
- Bankers wanted: Lenders in sunny Athens struggle to fill spots.
- The world has a sex problem. It's hurting growth.
- The Caribbean is running out of coconuts.