A worker at an aluminium smelter. (Photographer: Andrey Rudakov/Bloomberg)  

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U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe agree to work closely on trade as speculation heats up over where Trump and North Korean leader Kim Jong Un will hold their historic summit. Yield curve angst takes center stage, while the IMF sees growing risks to global financial stability. Here are some of the things people in markets are talking about.

Yield Curve Worries Intensify

Market participants from Citigroup to the Federal Reserve agree that an inverted Treasury yield curve would be an ominous sign for U.S. and global growth. And with the latest bout of flattening, the reality of sub-zero spreads may soon collide with an otherwise sanguine outlook on the economy.  St. Louis Fed President James Bullard was the latest to weigh in, saying Wednesday that central bankers need to debate the yield curve right now, and that it could invert within six months. Stubbornly low long-term yields could eventually force the Fed to slow down rate hikes, unless policy makers are willing to push the curve below zero.

Trump and Abe Talk Trade

In a joint news conference with Abe, Trump said the two countries would “work closely on trade. We will do something having to do with the imbalance.” Abe agreed there would be talks on free, fair and reciprocal trade, but said that while the U.S. is seeking a bilateral deal, Japan would prefer to work within the Trans-Pacific Partnership. The two leaders also touched on North Korea, with Abe noting that maximum pressure should be maintained on the isolated nation. The upcoming and unprecedented summit between President Donald Trump and North Korean leader Kim Jong Un may be held in Sweden or Switzerland, according to people familiar with the matter.

Metals in 'Turmoil'

The metals market remained gripped by turmoil on U.S. sanctions against Russia, with nickel and aluminum surging Wednesday. Consumers, manufacturers and traders are scrambling to secure supply cut off by Rusal, the largest aluminum producer outside China. Aluminum reached a six-year high and nickel jumped the most intraday since 2009. Alumina, a raw material needed to make aluminum, notched a fresh record. “It really is unprecedented in terms of the turmoil it’s unleashed,” Societe Generale’s Robin Bhar said. Oil surged to the highest since 2014 as American crude and fuel inventories dropped last week. 

IMF's Darkening Outlook

Threats to the global financial system are rising, with the price of risky assets surging in a manner reminiscent of the years before the global financial crisis, the International Monetary Fund warned. Downside risks to world financial stability have increased “somewhat” over the past six months, the IMF said Wednesday in the latest edition of its Global Financial Stability Report. “Financial vulnerabilities, which have accumulated during years of extremely low rates and volatility, could make the road ahead bumpy and could put growth at risk,” said the Washington-based group.

Coming Up…

China shares will be much on Asian traders' minds Thursday, even if the Shanghai Composite managed by the end of Wednesday to close in the green. The index fell for four days through Tuesday and was down as much as 1.5 percent Wednesday — on the verge of matching the longest losing streak since a 9-day slump that ended in December 2013. There will be plenty of data excitement to captivate markets also — New Zealand first quarter CPI kicked things off by topping estimates early in the Asian morning, and there's also Aussie jobs, an Indonesian rate decision and Hong Kong unemployment figures to look forward to.  

What we’ve been reading

This is what caught our eye over the last 24 hours.

To contact the author of this story: Libby McGowan in New York at lsallaberry@bloomberg.net.

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