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U.N. to vote on more sanctions for North Korea, Irma makes landfall in the U.S., and 10-year Treasury yields close to 2 percent. Here are some of the things people in markets are talking about.
Be It Resolved...
The U.S. is pushing for a Monday vote on a draft U.N. security council resolution to impose further penalties on Kim Jong Un’s regime. Japan has backed the U.S.’ proposal, which includes an effort to go after North Korea’s access to oil — a move that’s unlikely to be supported by China, its primary supplier. Leaders in the U.S. and China believe the other country is best positioned to resolve the ongoing crisis. Instead of another missile test to commemorate its government’s 69th anniversary — as South Korean officials had feared — Kim Jong Un reportedly hosted a party for the scientists and engineers involved with the nuclear project. The two Koreas remain worlds apart for all intents and purposes despite their geographic proximity, with the potential for further conflict leaving the South Korean won the worst-performing emerging market currency last week.
Irma Makes Landfall
On Sunday morning in the U.S., the storm that’s already ravaged islands in the Caribbean hit Florida before making a second landfall in the afternoon. Miami’s equivalent of Wall Street was turned into a river as Irma arrived. A shift in the storm put the west coast of the state, including Tampa Bay, at acute risk, with evacuation orders spreading throughout the region on Saturday. Roughly 2 million residents have lost power; Florida Power & Light warned that it will be a matter of weeks before electricity is fully restored. More than $1 billion in crops could also be imperiled by Irma. Experts estimate that the storm surge could reach up to 15 feet in parts of the state.
Strategists keep ratcheting down their forecasts for 10-year Treasury yields as the relentless rally in U.S. government debt continues amid decelerating inflation and a dearth of fiscal stimulus from Washington D.C. In the near term, disruptions to economic activity related to Hurricanes Harvey and Irma may provide the impetus for yields to plumb new lows. New York Fed President Bill Dudley said that the storms “could have an effect on the timing of short-term rate increases,” with Pimco group chief investment officer Dan Ivascyn indicating that they likely decrease the market-implied odds of a December hike.
Nikkei 225 futures are in positive territory ahead of the open. The Japanese yen lost 0.5 percent against the greenback in early Monday trading, the worst-performing G-10 currency, which is typically a boon for domestic equities. S&P/ASX 200 futures, meanwhile, are trading modestly to the downside after a meltdown in metals at the end of trading last week. The MSCI Asia Pacific Index managed to touch a level not seen in nearly a decade on Friday despite weakness in Japanese shares, with stocks in Hong Kong fueling gains.
A pair of Japanese releases highlight an otherwise sparse day of economic data for the Asia Pacific region. The tertiary activity index, which stalled in June, is expected to rise 0.1 percent month-on-month in July, while machine orders are seen up 4.1 percent on a monthly basis. In New Zealand, retail card spending is forecast to bounce back by 0.5 percent month-on-month in August after a decline of that magnitude in its prior reading. Malaysian industrial production is projected to quicken to annual growth of 5 percent as of July, a percentage point higher than its prior print. We may also get an update on car sales in India for August. Chinese producer and consumer inflation data for August, released at the tail end of last week, both came in hotter than anticipated, providing an unexpected jolt for global price pressures.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- China to set deadline for end of fossil-fuel car sales.
- Phone call between Saudi Arabia and Qatar’s leaders opens fresh wounds.
- Indian inflation poised to jump in headache for RBI.
- Latest Chinese debt default a cautionary tale for prospective investors.
- Hong Kong dollar bears are down — but not out.
- Brazilian meat tycoon turns himself in.
- Filmgoers flock to see creepy clown in ‘It.’