North Korea suspends high-level talks with Seoul. The 10-year U.S. Treasury yield jumps past 3.09%. And China’s trade delegation arrives in Washington. Here are some of the things people in markets are talking about.
North Korea Nixes Talks
North Korea said it’s suspending “high-level” talks with South Korea scheduled for Wednesday over military drills Seoul has scheduled with the U.S., while cautioning Washington to “consider the fate” of next month’s summit between Kim Jong Un and Donald Trump “carefully.” The statement announcing the suspension came from KCNA, North Korea’s state-run news agency. It wasn’t immediately clear whether the move indicated a breakdown in broader talks between Pyongyang and Seoul, which have intensified following a recent face-to-face meeting between Kim and his counterpart, South Korean President Moon Jae-in. State Department spokeswoman Heather Nauert said planning for the Trump-Kim summit continues and that the U.S. hasn’t received any notification about potential hurdles.
The U.S. Treasury 10-year yield jumped to the highest since 2011, briefly rising above 3.09% after solid U.S. retail sales data with a strong upward revision to the prior month fueled bets that the Federal Reserve will boost interest rates three more times in 2018. On top of Fed tightening, Treasuries have come under siege from a flood of new issuance as the nation’s budget deficits widen. And inflation expectations are hovering near the highest since 2014, after years of doubts about whether prices and wages would increase. The dollar rallied and stocks fell. And for the first time in a decade, cash is competitive.
Liu He’s Return to Washington
Liu He’s arrival in Washington this week puts the Harvard-educated technocrat back in the spotlight that he’s frequented since his rise to China’s highest political body last year. President Xi Jinping’s top economic adviser will spend four days in the U.S. for trade talks with Treasury Secretary Steven Mnuchin, his second visit this year. An earlier round of talks this month in Beijing ended in discord. The outlook for avoiding a costly trade war between the world’s two biggest economies looked grim after those engagements failed to make progress, but brightened after President Donald Trump’s shock reversal of a ban on China’s ZTE Corp. accessing American technology. Beijing praised the switch.
Malaysia’s Leadership Saga
Jailed Malaysian politician Anwar Ibrahim is expected to be freed Wednesday after the alliance he jointly leads pulled off a surprise election win last week, although it’s increasingly unlikely that he will take over as premier anytime soon, as Mahathir Mohamad said he may stay on as Malaysia’s prime minister for “one or two years.” In remarks on Tuesday, the 92-year-old said that Anwar -- a former enemy turned ally -- may just join the cabinet for a while after his release. Mahathir also said he may soon bring a case against former Prime Minister Najib Razak, and took a shot at currency traders.
Asia's traders will be eager to find out how Mr. He is doing in Washington as Wednesday gets rolling. Also on the radar is Japan's economy, with the government expected to report GDP contracted for the first time since 2015 in 1Q. And South Korean investors may be hoping that economists are right to forecast that unemployment fell back from the highest since 2010. We also get Australian consumer confidence and wages, along with China housing prices and a Thailand rates decision. There's also the Bloomberg Invest event in Sydney that will examine the future for those managing Australia's $2 trillion-plus pool of retirement savings. Speakers from J.P. Morgan Asset Management, Energy Australia, Vanguard, Pimco and Macquarie Group are among the headliners.
What we’ve been reading
This is what’s caught our eye over the last 24 hours.
- China’s holdings of U.S. Treasuries increased to a five-month high.
- Apple CEO Tim Cook told Trump that tariffs are the wrong approach to China.
- Private equity's plan to beat low-cost investing robots.
- Gap apologizes for the map of China on one of its T-shirts.
- CME is watching for user interest in Ether futures.
- Singapore’s biggest bank takes on China giants in a fintech batttle.
- Kristian Lum is helping create ethical robots.
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