North Korea wants a peace treaty, a huge day for German corporate news, and OPEC production cuts may be doomed. Here are some of the things people in markets are talking about today.
Peace in our time
South Korean media is reporting that Kim Jong Un wants to sign a peace treaty with the United States and establish diplomatic relations while agreeing to nuclear disarmament, after he meets Donald Trump. The U.S. president agreed last week to meet the North Korean leader, with key details of the summit yet to be decided. The U.S. would only agree to a peace treaty after de-nuclearization, rather than signing one to start the process, according to analysts. CIA Director Mike Pompeo said the U.S. would make no concessions to North Korea ahead of the talks. On the domestic front, Special Counsel Robert Mueller is said to be close to completing his investigation into whether Trump obstructed justice, but may delay a decision on the matter until he has finished other key parts of the probe.
lEON SE and RWE AG surged in European trading this morning as the companies engaged in a complex deal to take control of Innogy SE and transform Germany’s energy industry. Under the deal, EON will emerge with the retail and network businesses of both companies, while RWE will own the combined renewable-generation business plus a large stake in EON. The deal will mostly be share-based with relatively small amounts of cash changing hands. Elsewhere in Germany, under pressure lender Deutsche Bank AG said it plans to raise as much as 1.8 billion euros ($2.2 billion) in an IPO of its asset-management unit, while also increasing the pace of job cuts in its retail unit to 6,000 by the end of 2022, according to people briefed on the matter.
While output cuts agreed by OPEC and its allies have been successful in halting the decline in oil prices, signs are increasing that the producer group is falling victim to that success, with U.S. production taking a larger slice of the Asian oil market. ING Groep NV sees Brent crude, currently trading at $65.00 a barrel, falling to $57 in the second half of this year as shale producers take advantage of higher prices and improve cost controls. A barrel of West Texas Intermediate for April delivery was trading at $61.61 by 5:45 a.m. Eastern Time, as the commodity faded from last Friday’s post-jobs data surge.
Overnight, the MSCI Asia Pacific Index rose 1.7 percent, its biggest one-day gain in more than a year, while Japan’s Topic index closed 1.5 percent higher, with the region’s equities lifted by Friday’s U.S. payrolls number. In Europe, the Stoxx 600 Index was 0.3 percent higher as strong U.S. data was tempered by Trump’s continued saber-rattling on trade. S&P 500 futures pointed to a higher open, the 10-year Treasury yield was at 2.901 percent and gold slipped.
(Another) Brexit headache
The latest problem to rear its head for British Prime Minister Theresa May is a home-grown one. Devolved governments in Scotland and Wales are seeking guarantees that any powers returned to the U.K. after the country leaves the European Union will be passed onto the regional administrations. At risk for May is the possibility of reigniting a Scottish independence drive, leaving her trying to hold one union together as she leaves another. For markets this week, Brexit is likely to take a back seat as pound traders focus on fiscal policy with U.K. Chancellor Philip Hammond due to give his Spring Statement in which a cut in government borrowing needs is expected.