From Marc to Market:
Overview: Oil's wild ride has been joined by two other developments that are keeping investors off-balance. First, reports suggest that North Korea's Kim Jong-Un maybe in critical condition after surgery. He apparently was absent from last week's events celebrating his grandfather. The concern is about a potential power vacuum and the command and control of North Korea's weapons. Second, in a tweet late yesterday, US President Trump said he would sign an executive order suspending immigration, ostensibly to fight the virus and protect jobs. No details were provided. Trump has also renewed his threat to stop imports of Saudi and Russian oil. These disruptions have seen global equities fall. Following yesterday's 1.8% decline of the S&P 500, most of Asia Pacific's major bourses (including Japan, Australia, Hong Kong, Taiwan, and India) fell 2% or more. Europe's Dow Jones Stoxx 600's three-day advance is ending, and the benchmark is off about 2% in late morning turnover. US shares are lower, with the S&P off by almost 1.0%. Bond markets are firm, with core yields off 3-4 bp, which puts the US 10-year near 57 bp. Italian bonds are under-performing. The dollar is well bid against nearly all the major and emerging market currencies. The yen is also benefiting from the risk-off. The dollar-bloc and Norwegian krone are the weakest of the majors, while the Russian rouble, South African rand, and Hungarian forint are leading the EM complex lower. Gold is heavy, near two-week lows (~$1670), and oil remains on the defensive. The May WTI jumped in early Asia above $2 but is back below zero, while the June contract has collapsed to nearly $11 from $20 yesterday and is around $16.50 as this is written.
Asia Pacific
Fitch downgraded Hong Kong's credit to AA- yesterday from AA, noting that it has been hit with two shocks--the demonstrations and now the virus. It warns that growth may contract 5% this year after falling 1.2% last year. Nevertheless, the relatively wide interest rate differential over the US has sent the Hong Kong dollar to the strong part of the band for the first time in nearly four years. The LIBOR spread was its widest in 20 years. The key spot level is HKD7.75. The Hong Kong Monetary Authority intervened, selling HKD for the first time in four years.
South Korea reported exports fell 27% in the first 20-days of April compared with a year ago. Exports to China were off 17%, while shipments to the US fell 18%, and to Japan, down 20%. In terms of products, semiconductor shipments were off 15%, and autos, nearly 30% lower. The data was poor but likely overstated. The period had two fewer working days than a year ago. Adjusted for this, exports were off about 17% on an average daily basis....
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