As you’re acutely aware, Thursday marked “a sad moment in history”. Donald Trump, ostensibly responding to renewed aggressive rhetoric from Pyongyang, was compelled to cancel his meeting with Kim Jong-Un.
In a touching letter, Trump bemoaned the lost opportunity for the two children to meet face-to-face, dictator-to-aspiring-dictator.
In remarks delivered at the White House, he did leave the door open for a future meeting, but in a rather bizarre move, he also assured the world that America’s military was “ready if necessary” and that if it should become “necessary” for the U.S. to use force, South Korea and Japan would pay for it.
JUST IN: Pres. Trump says U.S. military is "ready if necessary," adding Japan and South Korea are "willing to shoulder much of the cost of any financial burden…by the United States in operations, if such an unfortunate situation is forced upon us." https://t.co/aRUXu8ETIv pic.twitter.com/bfzmMDIDUd
— ABC News (@ABC) May 24, 2018
So that’s fucking weird. Moon Jae-In is dismayed. “It’s very regrettable that the June 12 summit won’t take place” he said in a statement.
Anyway, “I bet dat bitch won’t show”…
That undercut risk appetite on Thursday…
…and it came on the heels of renewed trade tensions as Trump and Wilbur Ross are now all set to try and use “national security” as an excuse to slap tariffs on cars.
Speaking of protectionism, it came up at the ECB’s April meeting, minutes of which were released on Thursday, as did the well-documented deceleration in the eurozone economy.
“It was widely cautioned that the uncertainty around the outlook had increased since the March monetary policy meeting,” the minutes read. “In particular, risks related to global factors, including the threat of increased protectionism, had become more prominent and warranted monitoring with regard to their implications for the medium-term outlook for growth and prices.” And then there was this on the prospect of pushing the APP forward guidance change back by a month:
[While] it was underlined that the signs of a moderation in economic growth at the start of the year did not change the picture regarding the underlying pace of expansion, officials agreed that data releases ahead of the June monetary policy meeting would need to be carefully scrutinized to better understand the sources of the recent moderation in growth.
So that’s what the Governing Council was thinking a month ago. Meanwhile, the situation in Italy continues to be a cause of consternation for markets.
The spread to bunds remains elevated:
And here’s the redenomination risk chart that’s making the rounds:
Bund yields near YTD lows in a reflection of the risk-off sentiment:
Here’s another way to visualize the situation, using the relative performance of Italian equities:
Speaking of European stocks, the Stoxx 600 fell to its lowest since May 8 on Thursday:
Automakers were hit hard after Trump’s tariff threat:
It was another wild day for the Turkish lira, which sold off again, proving that Wednesday’s “very powerful” LLW hike was not in fact “very powerful.” Here’s a fun chart that documents some of the swings over the past two days:
The dollar was lower on the day. Here’s some possibly useful context:
Treasurys rallied, as the risk-off mood spurred by Trump’s decision to call off the Kim summit gave folks an excuse to buy havens:
Best day in over a month for gold:
Oh, and Bitcoin is down 10% this week because the DoJ is investigating possible manipulation (full story here). Remember, it’s got a lot of support at its intrinsic value of zero.
We’ll leave you as Trump left Kim…
If you change your mind having to do with this most important summit, please do not hesitate to call me or write. The world, and North Korea in particular, has lost a great opportunity for lasting peace and great prosperity and wealth. This missed opportunity is a truly sad moment in history.
Donald J. Trump
President of the United States of America