The markets of the world’s two largest economies, the US and China were closed on Monday, May 29. As one would expect, capital markets were mostly quiet.
Even the launch of another ballistic missile test by North Korea, the ninth this year, which followed on the heels of the G7 pledge to increase pressure on the rogue nation to abandon its efforts, failed to have much impact. Korea’s Kospi set a new record high before retreating into the close and losing 0.1% on the day. The Korean won also slipped by about the same among, while most of the regional currencies fell a little more.
EM FX closed last week on a mixed note, with markets struggling to find a compelling investment theme. The US jobs data this week could provide some more clarity on Fed policy. We still think markets are still underestimating political risk in the big EM countries, including Brazil (Moody’s outlook moved to negative), Mexico (election in state of Mexico), South Africa (ANC debates Zuma’s fate), and Turkey (ongoing crackdown on opposition). Continue reading
The fluctuation of oil prices is often cited as an important factor driving equities. Our work shows that this is not always the case and that the correlation between the price of oil and the S&P 500 continues to ease.
It is not just the fear that the investigations into Russia’s attempt to influence the US election will distract from the Trump Administration’s economic program. It is also that the economic agenda itself seems is less clear.
That China was not cited as a currency manipulator is no major surprise. Bush and Obama also made the threat on the campaign trail over jettison it when the were in office. China has not been cited since 1994. Although we argue the designation is not as onerous as it is frequently made to be, lack of use appears to have increased its symbolic importance.