The global reaction to the first round of the French presidential election was not confusing. Capital was sitting on the sidelines as the polls reflected a possibility of a second round Le Pen/Melenchon faceoff, which would have been devastating for global investors because fear of an EU break-up would have led to a massive repricing of risk premia. The avoidance of such an outcome led to a rush of capital into European markets, which provided support to Asia and the U.S. The German/French 10-year spread reacted as expected. The yield differential narrowed by a significant 20 basis points. The BUND yields rose against all European sovereign debt as Berlin’s haven status was rendered null and void for at least another two weeks. The GOLD and YEN also performed as expected as money rushed to purchase a risk on profile in a global zero interest environment. The EURO rallied by 2% as global capital flows into European stocks forced previous short euro positions to the sidelines. There’s nothing confusing about any of these outcomes. But let me throw some confusion onto some of the other geopolitical events making the front pages:
Posts Tagged ‘North Korea’
On Friday April 14 Treasury released a report that deemed no major trading a currency manipulator but five countries have met two of the three criteria and therefore will be closely monitored. This report is very well laid out but it is not incendiary as it seeks to persuade with a very soft touch. The three criteria of meeting of being a “manipulator” are:
1. A significant bilateral trade surplus with the U.S.of a least $20 billion;2. S current account surplus is at least 3% of a nations GDP; and3. Persistent, one-sided intervention occurs when net purchases of foreign currency are conducted repeatedly and total at least 2% of a nation’s GDP in a 12-month period.
The markets were riddled with all sorts of political news today as North Korea felt neglected and found a way to move center stage. The North Koreans like to have the spotlight shine on them when they need something from the world. I figure they must need food and heating oil for the winter so they upped the tension on the PENINSULA by lobbing some artillery shells into a South Korean military exercise. It is sad that SOUTH KOREANS had to die while Pyonyang played their typical games. A boycott of the North cannot work as the corrupt dictatorship just raises the temperature on hostilities until the world provides them with what they want and need. It is time to start bringing the U.S. troops home. Let the Chinese and Koreas resolve the problems that result from the arrested development of the North Koreans. Let the South Koreans be under the U.S. NUCLEAR UMBRELLA and start cutting back on U.S. global overreach. Oh by the way, don’t forget the bread and the heating oil so the North can get on with its goal of sucking the life out of its “citizens.”
Today’s Financial Times reported that Admiral Robert Willard, commander of the U.S. Pacific Fleet, issued warnings regarding China’s new assertiveness in the Asian region. In reference to China’s recent noise about claims to territorial rights in the Asian region, the Admiral said it was “generating increasing concern broadly across the region and require address.”