Five Things You Need to Know to Start Your Day

Written by
Luke Kawa
Written by

Luke Kawa

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North Korea defiant, China's balancing act looks good so far, and a plethora of records for risk assets. Here are some of the things people in markets are talking about.

‘Pay Dearly'

North Korea vowed to respond with an “action of justice” after being hit with sanctions by the United Nations Security Council on Saturday following two successful missile tests in July. The U.S. would “pay dearly” for its role in spearheading these penalties, according to North Korea's state news agency, which added that the regime's nuclear and intercontinental ballistic missile programs would not be up for negotiation. Discussions on how to defuse the crisis dominated the meeting of Asean foreign ministers in Manila, with the Philippine foreign affairs secretary conveying the group's “frustration” to his opposite number from North Korea. Japan has urged further pressure be put on the isolated nation, while South Korean President Moon Jae-in told U.S. President Donald Trump that the situation must be resolved peacefully.

A Win for China

China's bid to maintain financial stability by reining in leverage barely resonated with global investors: Fund managers don't see a hard landing for the world's second-largest economy as a chief threat to the global risk rally. The relative lack of concern is well-earned: China's foreign exchange stockpile rose for a sixth consecutive month in July. Debt among Shanghai-listed companies appears to have plateaued. And Beijing's policies are now helping buoy prices for iron ore and steel not only by stoking demand, but also by curtailing supply. However, Chinese issuance of late does belie the broader leverage crackdown, and has helped foster outperformance for other Asian corporates.

Records Galore

The Dow Jones Industrial Average extended its winning streak to double digits and booked its ninth consecutive record close to start the week. The S&P 500 Index also notched another all-time high, with tech stocks fueling gains as energy and financials lagged. That's in keeping with the pattern of constant market rotations in leadership that have kept volatility suppressed all year. Stocks had nothing on the the world's biggest cryptocurrency, though: Bitcoin was up more than 20 percent at one point in the session, amid allegations that spoofing contributed to the advance.

Coming Up...

Japan's current account surplus for June, forecast to halve to roughly 860 billion yen, kicks off Tuesday's economic events for the Asia Pacific region at 8:50 a.m. Tokyo time. Also due out: Australia's NAB business conditions and confidence indexes for July. We may receive an update on Chinese trade balance for July, expected to show the monthly surplus narrowed marginally while annual export and import growth continued their torrid pace -- adding to evidence that globalization is still very much alive in Asia. Japan's economic surveys for July are projected to show assessments of the current environment and outlook became slightly more positive.

Futures Up

Nikkei 225 and S&P/ASX 200 futures are trading modestly to the upside ahead of the open. On Monday, the MSCI Asia Pacific Index neared the decade-high level it reached last week, with a weaker yen buoying Japanese stocks. Rallying metals prices that pushed iron ore into positive territory on the year meant miners, along with technology stocks, led the advance in the region.