Daily Market Color

All Quiet Ahead of Singapore Summit


All Eyes Singapore

The focus of the world remains on the tiny island nation of Singapore, home to the historic summit between the United States and North Korea.  Stakes remain high, as the summit was at one point called off as a result of the less than cordial rhetoric between the two diplomatic envoys.  This is the first such meeting between a sitting US President and a leader of the isolated Asian nation.  Hope of a deal to denuclearize is high, and many feel that some agreement on the matter would have been a precursor to agreeing to meet in person.  Hope remains high that an agreement will be announced by the two leaders, and long simmering tensions in the region can be eased.  However, even if an agreement is reached, the markets will remain skeptical of North Korea following through with removing its capacity for nuclear weapons. 



Big Week of Economic Releases

The week ahead is packed with important economic releases.  Consumer Price Index (CPI) data is set to be released tomorrow morning at 8:30am NY time, Produce Price Index (PPI) is set to be released Wednesday morning at 8:30am NY time followed by the Federal Reserve Open Market Committee’s (FOMC) meeting reaching a conclusion at 2:00pm NY time.  Current expectations are for CPI to come in at 2.7%, nearing the 3% target the central bank is closely monitoring.  PPI is expected to come in at 2.8% which could also signal upward inflationary pressure in the economy.  Fed Funds futures markets are pricing in near certainty that the FOMC will raise rates a quarter of a point in the coming meeting.  Any significant changes to the statement released by the FOMC will be closely scrutinized by the market.

Thursday we have both the Bank of Japan (BOJ) and the European Central Bank (ECB) concluding their monetary policy meetings.   While no change is expected to either nation’s benchmark rate, there could be important news released after the ECB meeting concludes.  If there is a clear framework outlined towards winding down the ECB’s bond purchase program, the markets could sell off as this is seen by many as a necessary precursor to the central bank moving short term European rates higher.

Markets Quiet Ahead of News

US equity markets were quiet ahead of the summit in Singapore, with all three major indices finishing the day within 0.20% of where they began the day.  The NASDAQ gaining 0.19%, the S&P adding 0.11% and the DJIA squeaked out a 0.03% gain.  US Treasurys were also quiet on the day with the curve selling off 0-2bps in a flattening pattern.  The yield on 10 Year notes/swaps was up 1bp on the day with the 10 year note closing at a yield of 2.95%.  The US dollar was mixed against the Euro (EUR) and the Pound (GBP), falling 0.1% vs the EUR and gaining 0.2% vs the GBP.  Crude oil futures were up on the day gaining 0.5% to close at $66.05/barrel, on news of pipeline infrastructure issues in Nigeria and increasing disagreement among members of OPEC.           



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