March 9, 2018, by Lorcan Roche Kelly
In an unprecedented move, President Donald Trump has agreed to meet with North Korea’s Kim Jong Un, with South Korean National Security Council chief Chung Eui-yong saying the meeting would take place by May. Foreign policy experts are divided on the wisdom of the gathering at this time, with some warning that it legitimizes the North Korean regime, while all agree that it constitutes a major development. Initial market reaction was positive, with Korean and Japanese stocks rising, and havens such as the yen weakening the most in two weeks.
Trump yesterday signed the order giving effect to import tariffs to the tune of 25 percent and 10 percent on steel and aluminum, respectively, with the administration granting an exclusion to Canada and Mexico. He also left the door open for other countries to make the case for why they should be exempt. The move, which risks provoking a tit-for-tat trade dispute that would disrupt global trade, has been criticized by International Monetary Fund Managing Director Christine Lagarde and European Central Bank President Mario Draghi. China has promised “strong measures” in response to the move. The tariffs will come into effect within 15 days.
At 8:30 a.m. Eastern Time, U.S. payrolls data for February will be released, with expectations for employers to have added 205,000 positions in the month. For the Federal Reserve, still apparently mulling the pace of rate hikes this year, one of the key numbers to watch will be the increase in average hourly earnings. Any repeat of January’s bounce in pay may point to an acceleration of wage inflation, which would have an impact on monetary policy. The unemployment rate is expected to fall to 4.0 percent.
Overnight, the MSCI Asia Pacific Index rose 0.3 percent, with Japan’s Topix index closing 0.3 percent higher and South Korea’s Kospi Index ending the session with a 1.1 percent gain following the news of the Trump meeting. In Europe, the Stoxx 600 Index was broadly unchanged at 5:45 a.m. as traders try to digest the U.S. tariff news and yesterday’s ECB meeting, while waiting for payrolls data. S&P 500 futures were also flat, the 10-year Treasury yield was at 2.881 percent and gold was slightly lower.
Cutting it fine
U.K. officials said they don’t expect to reach a final Brexit deal until next January, which would only leave two months for lawmakers to try to make any last-minute changes to the agreement ahead of Britain’s exit from the European Union in March 2019. The last-minute deal would also prolong the uncertainty for businesses in the U.K. Any agreement on the transition period, which businesses are seeking to smooth the exit process, won’t become legally binding until the final withdrawal agreement is signed. In the negotiations, the Irish border issue continues to be a sticking point, with EU President Donald Tusk making clear at a press conference in Dublin yesterday that issues around the border need to be resolved before talks can move on.