Five Things You Need to Know to Start Your Day
Trump to leave G-7 early to meet Kim, discussions on a Deutsche Bank–Commerzbank deal, and emerging-market woes continue. Here are some of the things people in markets are talking about today.
Not hanging around
President Donald Trump will leave the two-day G-7 summit in Quebec tomorrow morning to head to Singapore to prepare for his meeting with North Korea’s Kim Jong Un. With tensions between the president and U.S. allies running high, and French President Emmanuel Macron saying he won’t sign a joint statement unless real progress is made, expectations for a material breakthrough at the gathering, which starts today, are very low.
Leaning on each other
Deutsche Bank AG Chairman Paul Achleitner’s numerous attempts to overhaul the struggling lender has turned up an idea that, while not new, would be seismic for banking in Europe’s largest economy. According to people familiar with the matter, Achleitner has spoken with top shareholders and key government officials about a potential combination with Commerzbank AG. While there are no formal discussions ongoing, some analysts say a merger would have merits, but the timing is far from perfect as both lenders need to clean up balance sheets. Shares in Deutsche Bank and Commerzbank were both lower in Frankfurt this morning.
The bad times continue for emerging-market currencies, with today’s biggest loser being South Africa’s rand which dropped as much as 2.4 percent, breaching 13 to the dollar for the first time since December as investors bet weak growth will not allow the country’s central bank to follow EM peers in hiking rates. In Brazil, the real saw more declines yesterday with the selloff increasing pressure on policy makers to do more to support the currency. There was some good news for Argentina, which secured a $50 billion stand-by arrangement from the International Monetary Fund to help restore investor confidence.
Overnight, the MSCI Asia Pacific Index declined 0.9 percent while Japan’s Topix index closed 0.4 percent lower amid rising emerging-market concerns and worries about Trump’s G-7 and Kim summits. In Europe, the Stoxx 600 Index was 0.6 percent lower at 5:45 a.m. Eastern Time as disappointing German industrial production figures added to wider geopolitical fears. S&P 500 futures pointed to a drop at the open, the 10-year Treasury yield was at 2.904 percent and gold was higher.
Hold ‘em, fold ‘em or up the ante?
While the economic calendar is fairly quiet today, next week will see the world’s three biggest central banks update their monetary stance. Expectations are for the Bank of Japan to hold policy unchanged, the European Central Bank to flesh out its plans to end its bond-buying program currently scheduled to finish in September, and for the Federal Reserve to hike rates. With unemployment in the U.S. so low, Fed officials could update their projections from three to four rate hikes this year, a move which would further increase pressure on developing-economy currencies.
What we've been reading
This is what's caught our eye over the last 24 hours.
- Bernanke says the U.S. faces a “Wile E. Coyote” moment in 2020.
- Surprise in ‘neglected’ Swiss money vote could spur franc plunge.
- China’s $11 trillion bond market tested by rising defaults.
- Trump gets a lot out of trade wars. The U.S. gets less.
- Airbus seals Bombardier C Series deal in challenge to Boeing.
- The biggest trophy prize for Europe’s new money: A forest the size of Manhattan.
- Nasa Mars rover finds organic matter in ancient lake bed.
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