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North Korea claims successful missile test, Gulf nations at an impasse and lots of data due out. Here are some of the things people in markets are talking about.
ICBM
The U.N. Security Council is poised to hold an emergency hearing on Wednesday after North Korea claimed it successfully test-fired an intercontinental ballistic missile. The American government confirmed it was an ICBM, signaling the North may now be capable of hitting the U.S., possibly Hawaii or Alaska. The revelations are being seen as a move by Kim Jong Un to exploit recent divisions between the U.S. and China ahead of President Donald Trump and President Xi Jinping's meeting at the G-20 this week. South Korea's currency and stocks fell on the reports regarding its northern, isolated neighbor.
Gulf Standoff
Qatari Foreign Minister Mohammed Al Thani said the 13 demands made by the Saudi-led alliance that cut off economic and diplomatic ties with the emirate a month ago are “neither reasonable nor actionable” ahead of the July 5 compliance deadline. Al Thani added that he wouldn't make the nation's response public — though he had briefed his German counterpart on their contents. German Foreign Minister Sigmar Gabriel — who had overseen talks between the Qatar and the Saudi-led bloc — said he expects the response to be rejected. Saudi Foreign Minister Adel Al-Jubeir said this deadline won't be extended again, but Qatar is learning to cope with this isolation by its neighbors — and in some cases, strike back. Qatar Petroleum said it is now taking "legal actions" against Abu Dhabi National Oil Co., alleging that its condensate shipments have been halted. Despite the ongoing rift, the emirate is looking to maintain its place as the top supplier of natural gas. The crisis has taken its toll on Qatari equities; sovereign bonds have held up much better.
Coming Up...
The big event of the day in the region will be the release of China's Caixin Services Purchasing Managers' Index, which came at 51.5 in May, at 10:45 a.m. Tokyo time. Both the private and official readings for the manufacturing sector in the world's second-largest economy were better than expected in June. Also on deck: the Bank of Thailand decision, Philippines inflation data for June, and Japan's Services PMI for June. Chinese and South Korean leaders Xi Jinping and Moon Jae-in are slated to hold separate events with German Chancellor Angela Merkel in Berlin ahead of the G-20 Summit later in the day. As early birds in the region awake on Thursday, they'll be greeted with the minutes from the Federal Reserve's June meeting, at which monetary policymakers hiked rates and provided more details on their balance sheet normalization plans. On Tuesday, the Reserve Bank of Australia held its benchmark policy rate at record lows and defied speculators who thought the central bank would make a hawkish shift, with Governor Philip Lowe instead focusing on elevated household debt and soft wage growth.
Markets Wrap
Investors flooded into safe havens on Tuesday, with the risk-off mood sparking a rally in assets like gold and the Japanese yen — one of the top-performing G-10 currencies. The news from North Korea threw a damper on what was shaping up to be a solid session; instead, the MSCI Asia Pacific Index and Euro Stoxx 600 index posted down days. U.S. markets were closed for Independence Day. West Texas Intermediate was virtually flat, though reports after the close that Russia will oppose any move to deepen output cuts in the agreement between OPEC and other major producers may weigh on crude going forward.
Futures Up
S&P/ASX and Nikkei 225 futures are trading modestly to the upside ahead of the open. The Aussie dollar has failed to pare any of its post-RBA losses, while the Japanese yen managed to retrace a large portion of its post-missile test gains. Hong Kong stocks will be in focus on Wednesday after the Hang Seng Index got clobbered in the previous session, suffering its biggest loss in eight months. Tencent Holdings Ltd. came under particular pressure after a government-owned newspaper decried the "negative energy" spread by its top-grossing smartphone game.
What we've been reading
This is what caught our eye over the last 24 hours.
HSBC considering Peter Hancock for CEO.
Monte Paschi wins E.U. approval for bailout package.
Chinese banks see short-term debt decline for first time.
Why Big Pharma can't profit from big waistlines.
War or recession may be needed to end low-volatility regime, says Goldman Sachs.
Russia wants its beach homes back.
Celebrating Canadian cuisine.
To contact the editor responsible for this story: Adam Haigh at ahaigh1@bloomberg.net.
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