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Pakistan-India tensions take a dramatic turn, Powell (and Cohen) in Congress, and May kicks the Brexit can. Here are some of the things people in markets are talking about today.

Strike back

The conflict between Asia’s nuclear neighbors intensified after Islamabad said it shot down two Indian aircraft in the disputed region of Kashmir today. In a statement, India confirmed losing one jet, and said Pakistan also lost one. Much of the airspace in the region is now closed, and there are reports of heavy armor firing across the border. The stock index in Karachi tumbled, and the Indian rupee dropped. 

Popcorn

Investors will keep a close eye on Jerome Powell’s second day of congressional testimony beginning at 10:00 a.m. Eastern Time this morning. His comments yesterday that growth looked uneven left stocks lower at the end of the session. While traders will still be fixated on the Fed Chair, for others the main event is likely to be Michael Cohen, President Donald Trump’s former lawyer and fixer, who  gives public testimony to the House Oversight and Reform Committee in which he is expected to accuse the president of wrongdoing. 

May capitulates 

British Prime Minister Theresa May’s Brexit strategy became more realistic as she admitted she could be willing to allow an extension to the March 29 deadline. While that does reduce the risk of her losing a vote later today on her negotiating tactic, analysts see it as more of a kicking-the-can exercise than a major breakthrough. There was some more good news for May as pro-Brexit lawmaker Jacob Rees-Mogg seems to be easing his opposition to the contentious Irish border backstop. The pound, the world’s best performing major currency this year, is holding close to the $1.3300 level this morning. 

Markets mixed

Overnight, the MSCI Asia Pacific Index gained 0.1 percent, giving up much of its early session gains on Pakistan-India tensions. In Japan, the Topix index closed 0.2 percent higher. Europe’s Stoxx 600 Index was 0.6 percent lower at 5:40 a.m. amid a raft of disappointing corporate earnings. S&P 500 futures pointed to a drop at the open, the 10-year Treasury yield was at 2.632 percent and gold was down. 

Summit

Trump and North Korea’s Kim Jong Un will have a private tete-a-tete before a formal dinner later. It's the second summit where the U.S. tries to persuade the isolated nation to surrender its nuclear arsenal. While expectations are low, experts would see Kim agreeing to a timeline for denuclearization as a successful outcome. In U.S. economic data today, wholesale inventories is due at 8:30 a.m., with December durable goods, factory orders and January pending home sales numbers all at 10:00 a.m. Earnings today include Lowe’s Cos Inc., Best Buy Co. Inc. and HP Inc. 

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