August 9, 2017
U.S.-North Korea tensions rise, haven assets rally, and Zuma survives the no-confidence vote. Here are some of the things people in markets are talking about today.
Fire and fury
President Donald Trump’s warning that North Korea’s nuclear threats would be met with “fire fury, and, frankly, power the likes of which this world has never seen,” is rippling across markets around the world. The North Korean army reacted to the statement by announcing it’s examining operational plans for a strike on Guam, a U.S.-controlled island 2,200 miles south east of Pyongyang. Rhetoric aside, Trump’s options for striking Kim Jong Un’s regime are probably quite limited.
Global markets switched to risk-off mode, with gold, bonds and the yen all rising. Overnight in Asia, the MSCI Asia Pacific Index slid 0.4 percent, while Japan’s Topix index dropped 1.1 percent as the yen rallied. In Europe, the Stoxx 600 Index was 0.9 percent lower at 5:30 a.m. Eastern Time, and the euro was trading at $1.1750. The yield on 10-year U.S. Treasuries eased to 2.24 percent, S&P 500 futures were down 0.4 percent and gold was trading at $1268.50.
South African President Jacob Zuma survived a no-confidence motion in parliament, despite more than two dozen members of his own party voting against him. The rand dropped after the results, and was extending those loses today, with the currency trading at 13.4465 to the dollar by 5:35 a.m. In Kenya, the opposition presidential candidate Raila Odinga has rejected preliminary election results showing a commanding lead for President Uhuru Kenyatta.
Data from China showed producer price gains were holding steady despite a recent surge in commodity prices. Policy makers in the country have their eyes elsewhere at the moment, however, as belated efforts to tackle the country’s “original sin” of household and corporate debt kick off. Authorities are looking to outside investors to help them with the mountain of debt, with China Chengtong Holdings Group Ltd., an asset manager mandated to rescue struggling state-owned enterprises, making its debut in global bond markets this week. The other problem facing planners is the scheduling of the Communist Party Congress, which means there isn’t likely to be a year-end increase in spending to keep the economy growing at the current pace.
Disney cuts Netflix
Walt Disney Co. said it would stop selling movies to Netflix Inc. and begin offering movies and ESPN sports programming directly to consumers via two new streaming services. Shares in both companies fell more than three percent in extended trading. Disney’s chief executive officer Bob Iger said that cutting out third parties was an “opportunity to reach the consumer directly.”