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Global markets shaky as geopolitical concerns in focus

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US Equities

Major US indices tumbled in early trading on Thursday as President Donald Trump canceled the Nuclear Summit with the North Korean President that had to take place in Singapore on June 12th. Trump said that his cancellation was due to the tremendous anger and open hostility in Kim’s recent statement. For the second consecutive day, US indices drop by almost one percent and recover the losses to the market close. A message from North Korea saying that they are still open to talks with the US helped easing market fears.

USD

The dollar index held stable near 2018 highs as geopolitical concerns are in focus. Post the escalation in the trade war spat between China and United States and the Geopolitical Concerns between North Korea and the United States, investors shifted their trading to risk-off assets. Safe Haven currencies such as the Swiss Franc and the Japanese Yen gained against the US dollar along with the precious metal. Moreover, the greenback lost momentum post the dovish FOMC minutes that suggested that the Fed will not act aggressively if inflation rose above the 2% target. The Initial Jobless claims rose by 11,000 to reach 234,000 in the past week.

GBP

The British Pound bounced-off $1.33 level boosted by the dovish FOMC tone and the better-than-expected rise in retail sales for the month of April. The upbeat retail sales figures were the first strong economic report from the United Kingdom in a while. The previous numbers also were revised higher. In terms of data, the preliminary release of the first quarter GDP is due today.

JPY

The Japanese Yen gained almost two percent in the past days against the US Dollar as the demand for the safe-haven currency increased due to the rise in the geopolitical concerns and trade war fears. The Japanese Yen is considered a safe investment in case of political and financial uncertainty. However, the Tokyo Consumer Price Index for May rose less than expected to put pressure on the currency. The Bank of Japan is taking aggressive measures to fight deflation. Governor Koruda confirmed in the last meeting that if needed they will take additional steps to reach the 2% level.

Gold

Gold prices climbed above the $1,300 level for the first time in over a week supported by the cancelation of the Nuclear Summit between the United States and North Korea. Gold is considered a safe investment by investors in cases of political and financial uncertainty. Moreover, the precious metal found support post the FOMC meeting minutes that indicated that the Fed might not be aggressive in the pace of raising interest rates in the future.

Oil

Oil slipped for the third consecutive day for the first time since late March on talks that Russia might gradually increase its output. Oil producers are excited to raise their production as the prices of oil reached the highest levels since late 2014. US oil crude oil production rose to a new level of 10.73 million barrels per day, up 25% in the past two years. The United States is ranking the second ahead of Saudi Arabia and aiming for Russia’s first place. The US rig count from the Energy services firm Baker Hughes is due today. 

The most important economic events:

GMT Country Event Expectation Previous
8:30 UK GDP (YoY) (Q1) 1.2% 1.2%
8:30 UK GDP (QoQ) (Q1) 0.1% 0.1%
12:30 US Core Durable Goods Orders (MoM) (Apr) 0.5% -0.1%
13:20 US Fed Chair Powell Speaks    
13:20 UK BoE Gov Carney Speaks    
14:00 US Michigan Consumer Expectations (May) 86.9 89.5
17:00 US U.S. Baker Hughes Oil Rig Count   844

 
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