“Is This Time Different?”: Global Risk Pares Losses Despite Report Of Imminent N.Korea ICBM Launch

Having started off with a sharp gap lower following Sunday’s news of the latest, 6th nuclear test by North Korea, global stocks and US futures pared losses in the overnight session, despite reports of North Korean preparations for yet another missile launch, while the yen trimmed its risk-off gains even as gold kept its upside and the South Korean Kospi closing 1.2% lower, with traders asking whether “this time will be different:, or inversely, will today’s market reaction will be a carbon copy of what happened last Monday, when stocks gapped sharply lower on North Korea missile launch fears, only to surge 1% by the end of the week, as shown in the chart below.

Still, concern that U.S. President Donald Trump has few viable options to rein in North Korea has disrupted a three-week-long rally in emerging markets, sending stocks to the biggest loss since Aug. 11: The MSCI index of world stocks dropped 0.7%, led by consumer-discretionary and industrial-goods sectors, as the relative strength index, a measure of momentum, fell to 60 from 68 on Friday.

The South Korean Kospi extended declined at the close, down 1.2% after Yonhap reported South Korea had detected North Korea’s preparation for an ICBM missile launch.  The index fell as much as 1.7% at the open Monday before paring back some of its decline to a 0.9% drop; volatility among South Korean stocks surged as much as +15%, although absent further escalation, that spike will likely be faded in the coming days.

Europe’s Stoxx Europe 600 Index declined, with all industry sectors in the red, after a Monday morning report from Yonhap that Pyongyang is preparing to launch an intercontinental ballistic missile heightened investors’ unease. European equity markets opened lower and stay within a tight range, with tech and banking lagging.

Both USD/JPY and U.S. equity futures fell, but have stayed within overnight ranges and in the case of the Yen, much of the latest gains have been unwound, while European government bonds advanced and Swiss franc led currency gains.

The euro strengthened even as economists expect European Central Bank President Mario Draghi to express concern Thursday about the currency’s rise. Industrial metals including copper and nickel extended a rally. US Treasuries and bund futures briefly hit session highs on Korean concerns before fading. The German curve steepened, with focus on upcoming supply this week.

Having surged to the highest level since the Trump election victory, spot gold edged modestly lower from overnight high, tagging $1,334 in early trading.

Currencies, as a group, erased losses thanks to an advance in offshore yuan; otherwise, most currencies are lower against the dollar.

Meanwhile, China’s onshore yuan extended gains to a 15-month high as North Korea’s nuclear test failed to dent bullish sentiment on the currency. The Chinese exchange rate traded in Hong Kong’s overseas market rose for a 14th day, the longest rally on record. In onshore markets, the CNY climbed 0.5% to 6.5245 per dollar; the currency climbed 1.35% last week, the strongest showing in CFETS data going back to April 2007. The PBOC strengthened the yuan reference rate by 0.37%, the most since Aug. 10, to 6.5668 against the greenback.

It wasn’t just the Yuan that proved immune to Korean worries: shares in mainland China rose as strength in commodity producers outshone concerns about North Korea saying it successfully tested a hydrogen bomb over the weekend. Hong Kong’s benchmark fell for a third day. The Shanghai Composite Index rises 0.4%, most in a week, to 3,379.58

What happens next for global risk is in the hands of China and the US as the North Korean conflict is rapidly escalating into a proxy war of the world’s two most powerful nations.

US markets are closed on Monday for holiday.

Top Overnight Headlines

  • South Korea has continued to detect preparations related to another ICBM launch by North Korea according to a Defense Ministry official
  • Trump says U.S. considers new sanctions, stopping all trade with any country doing business with North Korea; Mattis says ’many military options’ available
  • Mnuchin says debt limit hike should be linked to Harvey aid
  • China says using force to resolve the North Korea issue isn’t an option: Reuters
  • China says U.S. President Trump’s trade threat over North Korea is “unacceptable” and “unfair”
  • U.K. government has proposed extending the next round of Brexit negotiations on a rolling week-by-week basis until breakthrough is reached on financial settlement according to people familiar: Politico
  • U.K. Aug. Construction PMI: 51.1 vs 52.0 est; weakest reading since July 2016, Markit note reduced levels of commercial building
  • U.K.’s Davis dismisses reports of GBP50 billion EU payment as ’nonsense’
  • Portugal outlook changed to positive from stable by Moody’s
  • Ex-PBOC adviser urges free float of yuan rate: Securities Journal

In European equities, risk-off sentiment following North Korea’s nuclear test has hit European shares in early trading this Monday, with all sectors in negative territory, led by financials. In regards to stock specific movers, Fiat Chrysler are down around 3 percent after its CEO said that Fiat had received no offer for the firm.

In fixed income, EGB’s trading a better levels following the aforementioned newsflow out of North Korea. Peripheral bonds outperforming against their German counterpart as spreads tighten. Eyes could be on the performance of PGB’s vs. Bunds after Moody’s placed Portgual’s sovereign rating on positive outlook, as such a possible upgrade to investment grade from junk may see the spread narrow to YTD lows at mid-220bps.

In currencies, JPY/CHF: Safe haven flow dominating sentiment to begin the week, which came after reports that North Korea successfully launched its most powerful so-called H-Bomb to date. In turn, USD/JPY  slipped to the mid-109s while USD/CHF broke through 0.96 as risks are seemingly skewed to the downside as markets digest and monitor the situation. Aside from the tensions on the Korean Peninsula, concerns over the US debt limit will keep a lid on risk appetite, providing further headwinds for the greenback. The soft NFP report on Friday and dampened risk sentiment has underpinned EUR this morning. Although the currency remains below 1.1900 as the ECB meeting is likely to cap near term gains as speculation mounts over potential comments from Draghi and Co. regarding the recent appreciation in EUR.

In commodities, WTI and Brent crude futures slipping this morning, more notably in Brent as WTI is somewhat supported as several refineries resume activity. RBOB gasoline futures easing after emergency stocks had been released amid early indications that the damage to infrastructure were not as bad as initially feared.

* * *

DB’s Jim Reid concludes the overnight wrap

With August behind us and the weather here in the UK yesterday already starting to resemble autumn it feels like the final push into the end of the year is well and truly on. This week should be an interesting one with the highlight likely coming this Thursday with the ECB meeting. We aren’t expecting any policy announcements – indeed our economists expect Draghi’s strategy to be one whereby he and the ECB wrap the QE exit step in dovishness when it is announced in October – but the risk is perhaps that Draghi says very little at all and buys even more time for the ECB. In this regard, what Draghi does or doesn’t say about the euro is what most in the market will probably be looking out for. It feels like the consensus expect Draghi to address the recent appreciation but we’d imagine that he will probably have to also strike a bit of a  delicate balance given that the data is holding up pretty well still. Draghi’s job was perhaps made ever so slightly easier by that fact that the single currency closed on Friday 1.75% off Tuesday’s highs but it is still up 3.50% since the ECB last met back in July.

Anyway that is for Thursday. In the meantime, it feels like déjà vu writing this again this morning as the weekend headlines are once again dominated by the latest North Korea missile test. Yesterday’s test was called a “perfect success” by the Korean Central News Agency with the underground explosion supposedly ten times more powerful than previous detonations. The explosion also caused a magnitude 6.3 earthquake and all the talk is that the test has reached new ground in terms of potential magnitude and power. President Trump responded to the latest test by saying that “the United States is considering, in  addition to other options, stopping all trade with any country doing business with North Korea”. Treasury Secretary Mnuchin confirmed that he is drafting a sanctions package to send to Trump and Defence Secretary Mattis said that the US has “many military options” when questioned about a possible response. Other world leaders also had their say. Germany Chancellor Angela Merkel said that North Korea’s latest actions had reached a “new dimension” while Russia’s Putin and China’s Xi Jinping also responded and agreed to “appropriately deal with” the latest test. An emergency UN meeting has been called for today.

The latest development has seen markets in Asia start the week with a risk-off tone although moves overall have been fairly modest still. In terms of safe havens, Gold is up +0.61%, while the Yen and Franc are +0.41% and +0.38% respectively. Equity markets across Asia are down with the Nikkei (-0.86%) and Kospi (-0.79%) standing out the most, while the ASX 200 (-0.49%) and Hang Seng (-0.47%) are also in the red. Markets in China are flat.

It’s worth noting that the US is off today for the Labour Day holiday so we will have to wait until tomorrow to see how cash markets across the pond respond although S&P 500 futures are down around -0.32% as we go to print. In terms of other news from the weekend, in Germany, Merkel and her Social Democratic opponent Martin Schulz took part in a TV debate where they clashed over refugee policy with Merkel standing by her view on keeping the country’s borders open and Schulz attacking Merkel for her early response to the refugee crisis in 2015. This was actually the only live TV debate between the two leaders before the election on September 24th and the latest polls show Merkel as holding a roughly 13-14% lead over Schulz after the latter had at one stage closed that gap completely earlier in the year. According to Bloomberg two flash polls released after yesterday’s debate were scored a draw and a Merkel win.

Elsewhere, here in the UK, Brexit Secretary David Davis called a Sunday Times report suggesting that PM Theresa May was to approve a £50bn Brexit Bill as “nonsense”. The report also suggested that May won’t disclose any details on kick starting trade talks until after the Tory Party conference in October. Conversely, EU negotiator Barnier said the British people need to be “educated” about the price they will pay for quitting the EU.

Meanwhile in the US it’s worth noting that Congress will return from the August recess on Tuesday with the debt ceiling debate almost certain to be front and centre. Over the weekend Mnuchin noted that the debt limit should be linked into a package of relief for victims of Tropical Storm Harvey. The suggestion on Friday was that the House could plan a vote on funding as a standalone bill this week but the latest comments suggest that this is less likely now. Assuming lawmakers don’t get in the way of relief efforts, one would imagine that this perhaps lowers the risk around the debt ceiling as time ticks down towards the end of month deadline.

Now just recapping the macro data on Friday. In the US, the main focus was a softer than expected August employment report, with the change in nonfarm payrolls coming in at 156k (vs. 180k). Adding to the disappointment, the unemployment rate was a tad higher at 4.4% (from 4.3%) and average hourly earnings rose just 0.1% mom (vs. +0.2% expected), leaving growth at +2.5% yoy.

However, we would still characterize the labour market as being in solid shape and note that the August reports can be impacted by difficulties in seasonaladjustment around the holiday period. Further, our US economics team notes that they would not be surprised to see subsequent positive revisions (since 2010, August payrolls have been revised up by +55k on average between the initial and third prints). Elsewhere, the August ISM manufacturing was higher than expected at 58.8 (vs 56.5 expected), marking the best reading since March 2011. Moving along, the University of Michigan consumer confidence print was softer than expected at 96.8 (vs 97.5) but the final Markit US manufacturing PMI was revised up slightly to 52.8 from 52.5.

In Europe, UK’s manufacturing expanded at the strongest pace in four months, with the August PMI at 56.9 (vs. 55.0 expected). In Italy the manufacturing PMI was also higher than expected at 56.3 (vs. 55.3 expected) while the final reading for 2Q GDP was confirmed at +0.4% qoq and +1.5% yoy. Elsewhere, other final Markit manufacturing PMIs were broadly in line with the flash estimates, with the Eurozone at 57.4 and France at 55.8, but Germany was a tad lower at 59.3 (vs. 59.4 flash).

By the end of play markets ended slightly firmer with the S&P 500 closing +0.20% and Stoxx 600 up +0.60% driven by gains in mining names. Bond yields rose in the US and Europe, with UST 10y up 5bp to 2.166% and core European bond yields up around 2bps. The US dollar index was broadly unchanged on Friday and has dipped 0.20% this morning. Elsewhere, WTI oil edged up 0.3% and US gasoline prices fell 1.8% on Friday (first decline in the week) and have fallen a further 2.8% this morning.

Taking a step back, it’s worth noting that the current rally in the S&P 500 is the 3rd longest since WWII without a 3% selloff, but our asset allocation chief strategist Binky Chadha remains constructive. He noted that the market remains overdue for a pullback and rising domestic and geopolitical risks provide plenty of potential catalysts. But as in past episodes, he views the economic and market context dominating. On the economic front, Binky sees further upside to global growth, with PMIs having further to recoup pre dollar and oil shock levels, a strengthening in the US labour markets and capex, while Binky also expects earnings growth to sustain in the double digits. On the market front, he sees the demand-supply picture for US equities becoming more supportive with inflows on a turn up in data surprises and higher rates as inflation picks up.

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No need to consider release of <b>oil</b> stocks after Harvey: IEA

“There is a need to consider how we place our stocks, where we place our stocks and the combination of crude oil versus products is an issue that we …

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Three years after the war: Gaza youth speak out

“At bedtime, I am afraid to turn the lights off. I am not a coward, it is just that I worry that this bulb hanging from the ceiling is the last light that remains (shining) in my life.” Soon after he penned these words, Moath Alhaj, a young artist from a Gaza refugee camp, passed away in his sleep. After disappearing for two days, Moath’s friends broke down the door of his house and found him huddled with his blanket in a place in which he lived alone for 11 years. Moath lived in the Nuseirat Refugee Camp, one of Gaza’s most crowded camps, a name which is associated with historic hardship, war, and legendary resistance. Raised in the United […]

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China’s independent <b>oil</b> refiners plan to integrate production in new consortium

Since late 2015, China has allowed 31 mostly privately-owned oil refineries to import crude oil, the majority of them based in Shandong province.

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North Korea Making Preparations For Another ICBM Launch, South Says

Barely had the market digested news of the latest, 6th – and this time allegedly thermonuclear – test by North Korea (with the South Korean Kospi cutting initial losses of as much as 1.6% in half on yet another BTFNWD ramp), when Yonhap reported that South Korea’s spy agency said it had detected that North Korea is making preparations for a possible intercontinental ballistic missile launch, a move that would further raise tensions a day after it conducted its sixth and most powerful nuclear detonation.

Chang Kyung-soo, acting chief of the defense ministry’s policy planning office, told lawmakers on Monday that North Korea was making preparations for a missile firing, according to Bloomberg while Yonhap adds that South Korea’s spy agency said there was a chance the North could fire an ICBM into the Pacific Ocean, saying that the isolated state was able to conduct a nuclear test at any time. Gen. Jang didn’t say what the signs of activity were, nor did he give a time frame for a possible launch. But many experts have been preparing for a weapons test around Sept. 9, when North Korea marks the anniversary of its foundation in 1948.

His assessment was echoed by South Korean intelligence officers, who said North Korea could test launch another ICBM toward the northern Pacific Ocean or a submarine-launched ballistic missile, according to lawmakers who attended a closed-door legislative meeting on Monday. The intelligence officers also said North Korea could conduct further nuclear tests at any time, based on construction work on two tunnels at its test site that appear to be near completion, these lawmakers said.

The National Intelligence Service (NIS) told lawmakers in a closed session that Pyongyang may lob the missile around the anniversary of the regime’s foundation slated for Saturday or the establishment of the ruling Workers’ Party of Korea on Oct. 10.

North Korea fired ballistic missiles, including two ICBMs fired in July, at a lofted angle to prevent them from crossing over other countries including Japan. But Pyongyang lobbed a Hwasong-12 intermediate-range ballistic missile that flew over Japan last week.

 

“There is a possibility that the North would fire an ICBM on a standard trajectory,” the NIS was quoted as saying by lawmakers.

Separately, Gen. Jang said the U.S. and South Korea are in talks about deploying an aircraft carrier or stealth bombers to South Korea as part of the response to North Korea’s recent actions. Top South Korean officials had said in recent days that the two allies were in discussions about the deployment of “strategic assets” to the Korean Peninsula. At the time, officials didn’t elaborate on what strategic assets they were considering, but the phrase typically refers to aircraft carriers, bombers or nuclear weapons.

The NIS also said that more analysis is needed to verify whether the North
detonated an electromagnetic pulse-based bomb or a hydrogen bomb during
its nuclear test, according to lawmaker. “North Korea claimed an H-bomb test, but we are analyzing it on the assumption that there could be three possibilities — a hydrogen bomb, an atomic detonation and a boosted fissile weapon,” the agency was quoted as saying.

It said that Pyongyang appeared to try to show that international sanctions are not working and to express its complaints against China or Russia by timing the detonation with a Beijing-hosted five emerging nations BRICS summit and Russia’s economic forum slated for later this week.

 

“The North also seemed to want to spark tensions to pressure the United States into changing its North Korea policy,” it added.

 

It said that the latest detonation was conducted in a northern tunnel of its nuclear site in the northeastern area where Pyongyang previously carried out three tests.

Meanwhile, South Korea earlier in the day paved the way for the full deployment of a U.S. missile defense system while its military conducted a live-fire drill with North Korea’s test site as the virtual target. The Environment Ministry on Monday conditionally approved an environmental impact report on the Terminal High-Altitude Area Defense system.

That removes the final administrative hurdle for complete installment of the missile shield, known as Thaad, which China sees as a threat to the region’s “strategic equilibrium.” South Korea’s Defense Ministry said it would install the system’s remaining launchers “soon.” The governments in Seoul and Washington were also discussing deployment of a U.S. carrier group and strategic bombers, Yonhap said.

Following Sunday’s latest nuclear test, President Trump threatened to increase economic sanctions and halt trade with any nation doing business with North Korea – a threat he has used before without following through. That list would include China – the U.S.’s biggest trading partner – which accounted for about a sixth of its overseas commerce. China hit back at Trump’s threat, with Foreign Ministry spokesman Geng Shuang saying the comments were “neither objective nor fair.”

While Asian stocks fell on Monday as investors turned to haven assets, sending the yen, gold and Treasury futures higher, the fallout was relatively contained with S&P futures down just 0.3% as of 6am ET. The biggest declines were in Tokyo and Seoul, with more moderate reactions elsewhere in the region.

Trump, who threatened over the weekend to pull out of the U.S.-South Korea trade agreement, took a shot at President Moon Jae-in’s administration after the nuclear test. On Twitter, he said that South Korea is finding that its “talk of appeasement with North Korea will not work.” In response, Moon’s office said that war shouldn’t be repeated and that South Korea and its allies “will pursue the denuclearization of the Korean peninsula through peace.” The two leaders haven’t spoken since North Korea detonated what it called a hydrogen bomb.

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Indian parents fly to the US to help son ‘discipline’ wife, police say as trio arrested

Author: 
Arab News
Mon, 2017-09-04 16:23
ID: 
1504520947016517900

DUBAI: US police arrested three Indian nationals this week after officers found a woman and child being held at a home in Hillsborough County, Florida.
According to the Hillsborough County Sheriff’s office, the woman’s husband — 33-year-old Devbir Kalsi — had beaten her and his parents had flown in from India to “counsel and discipline” the woman — 33-year-old Silky Gaind — at his request.
Deputies described Gaind as “badly beaten and bruised over her entire body,” allegedly from beatings by her husband and his parents.
According to the Tampa Bay Times, police said the alleged beatings had “been ongoing for an extended period of time.”
Authorities learned about the case when Gaind called her parents in India on Saturday to tell them. Her parents then informed police in the US.
Police officers arrived at the house at around 6.30 a.m. on Saturday morning and heard Gaind “(scream) for the deputy to save her and her child,” the Sheriff’s Office said, according to the newspaper.
An officer began arresting her husband, Devbir Kalsi, but was confronted by the man’s father, Jasbir Kalsi, 67, and mother, Bhupinder Kalsi, 61.
The newspaper reported that an official investigation found that the parents had flown over from India to “counsel and discipline” Gaind.
According to the arrest report, which was seen by the newspaper, Devbir Kalsi and his wife argued late Friday night, during which he allegedly hit her “repeatedly and forcefully.” According to the arrest report, the man’s parents then allegedly began hitting her, causing bruising to the face, neck and torso. During the fight, the woman was holding her child, who was reportedly inadvertently hit in the face.
The arrest report also states that the woman was locked inside a room after the argument.
Devbir and Jasbir Kalsi face charges of false imprisonment and child abuse while Devbir Kalsi also faces a charge of felony battery and his father faces a charge of aggravated battery with a deadly weapon, for allegedly threatening the wife with a kitchen knife.
Bhupinder Kalsi faces charges of battery domestic violence and failure to report child abuse, according to the newspaper.
The trio have been booked into Hillsborough County jail.

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Daesh is not dead and buried; it is another tool in the war on terror

As the pick-up trucks and black-clad soldiers of Daesh overran the city of Raqqa in northern Syria and declared the establishment of a new ‘Caliphate’ in 2014, the world watched in astonishment. Some were taken in by the emergence of this shadowy group, seeing it as the new saviour of the Muslim world, daring to do what the monarchies and regimes in the Middle East had been too afraid, apathetic or sold out to do. They declared that the regional countries were “Zionist puppets” and so the task had passed to this new group to establish the long-awaited Caliphate. Others were more sceptical of Daesh and its supposed legitimacy, and rightly so. Opinions aside, Daesh moved rapidly, seizing both urban […]

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Iraq: Civilian safety ‘a priority’ in planned Kirkuk campaign

The Iraqi army on Sunday said the evacuation of endangered civilians would take priority during planned operations to capture Kirkuk’s southern Al-Hawija district from the Daesh terrorist group. On Saturday, the Defence Ministry announced that the army had redeployed troops from Baghdad to the northern Kirkuk province in advance of a fresh campaign to retake Al-Hawija, which has been held by Daesh since mid-2014. “We aren’t going to rush this campaign,” Brigadier-General Yahya Rasul, a spokesman for the Iraqi army’s Joint Operations Command (JOC), told Anadolu Agency, adding: Our priority will be the evacuation of civilians trapped [in Al-Hawija] by the terrorists “The JOC’s plan is unequivocal in this regard,” Rasul added. “Our first objective will be liberating civilians and […]

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Turkey criticises German ‘populism’ after Merkel shift on EU membership

A spokesman for Turkish President Tayyip Erdogan accused German politicians on Monday of indulging in populism after Chancellor Angela Merkel said she would seek an end to Ankara’s European Union membership talks. Merkel, seeking a fourth term in office in Germany’s September 24 election, said in a debate on Sunday it was clear that Turkey should not join the European Union, and that she would talk to other EU leaders about ending its stalled accession process. “It is not a coincidence that our president Erdogan was the main topic of the debate,” Erdogan’s spokesman Ibrahim Kalin tweeted, criticising what he described as mainstream German politicians’ “indulgence in populism”. “Germany and Europe’s attacks on Turkey/Erdogan, by ignoring essential and urgent problems, […]

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