It’s Too Quiet: Except For China. And South Korea. And Collapsing Metals.

It’s Tuesday, and they’re voting in South Korea. There’s an annoying power vacuum over there at a precarious time.

Here’s a deliberately deadpan rundown:

Turns out the former president – Park Geun-hye – was bribing people and abusing her power and shit like that. She’s in jail and apparently is refusing to vote. So that’s fun.

Turnout is heavy. Moon Jae-in has apparently won (get it?). He’s a liberal. Beijing is keeping a close eye on this. So is Kim in the North because Moon is open to a softer touch when it comes to Pyongyang.

He’s also aiming to rein in nepotism and family-run conglomerates. His message: “regime change” and “cleanup.”

Chances are, he’ll adopt some kind of fiscal stimulus program (although he’ll need to raise revenues too) aimed at creating some jobs. That’ll push up bond yields. “I would expect the longer-maturity yields to rise somewhat,” Rajeev De Mello, head of Asian fixed income at Schroder Investment Management said in a Bloomberg TV interview on Tuesday.

You get the idea.

*****

Meanwhile, everyone’s asleep (except some folks in China who are worried).

The yen’s at a two-month low (so, the lowest since the March hike) against the dollar as risk appetite is generally there despite the sell-the-news atmosphere that lingered over Monday’s trading.

USDJPY

Yields are helping the dollar advance as well. “A drop in Treasuries supported the dollar amid speculation that a hawkish speech by the Federal Reserve Bank of Cleveland President Loretta Mester on Monday may have been the opener of a series of hawkish commentary by Fed officials this week,” Bloomberg wrote this morning. Basically, June is a sure bet.

USDJPYyields

The euro is still stuck in “sell the news” mode, falling a second day and consolidating near 1.09 as a further catalyst is so far seen lacking. “Dip-fading interest remains firm down to 1.0850,” traders told Bloomberg, adding that “spot weakness has seen demand for upside exposure on the one- and two-month tenor.”

EURUSD

Gold is sitting at two-month lows, which isn’t surprising. The Le Pen tail risk is off the table and Seoul hasn’t been nuked yet so you know, “no catalysts.”

Gold

“Further pressure cannot be ruled out, [but] we expect bargain-hunting to emerge and physical buying to strengthen should the market test $1,200/oz, paving the way for a recovery,” UBS analyst Joni Teves says.

Oh, there’s still “big trouble in little China.” On the heels of commodities carnage and amid rising yields, Beijing is cracking down further on recklessness and leverage as reports suggest some Chinese rural banks have suspended interbank businesses as “regulators conduct spot checks.”

And then there was this via Bloomberg:

  • China is stepping up scrutiny of stock traders as the government prepares to host the Belt and Road Forum in Beijing, according to people with direct knowledge of the matter.
  • The nation’s equity exchanges told brokerages to notify clients that regulatory scrutiny will increase through May 16, said the people, who asked not to be identified discussing policies that haven’t been announced publicly
  • Authorities will apply extra scrutiny to active traders, investors who control large sums of money and accounts that have already been flagged for special monitoring, the people said
  • State-backed funds stand ready to buy shares if needed, they said
  • The CSRC didn’t immediately respond to a faxed request for comment. Exchanges in Shenzhen and Shanghai declined to comment

Iron ore looked shaky (again) following a feeble (and ultimately futile) attempt at a rebound on Monday.

In Dalian prices were down nearly 2%, while futs in Singapore dropped nearly 1% to below $60. This is five straight days of losses for the spot which is at its lowest level since October. Obviously, this is killing the miners:

IronFort

(Bloomberg)

Asian equities were mixed while Europe rebounded.

  • Nikkei down 0.3% to 19,843.00
  • Topix down 0.3% to 1,581.77
  • Hang Seng Index up 1.3% to 24,889.03
  • Shanghai Composite up 0.06% to 3,080.53
  • Sensex up 0.09% to 29,953.37
  • Australia S&P/ASX 200 down 0.5% to 5,839.90
  • Kospi up 2.3% to 2,292.76
  • FTSE 7347.83 46.97 0.64%
  • DAX 12782.37 87.82 0.69%
  • CAC 5399.69 16.74 0.31%
  • IBEX 35 11096.30 UNCH 0%
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