Sydney: The dollar jumped to a 3-week top on Tuesday while stock markets in Asia were choppy as an historic US-North Korea summit got underway in Singapore, raising some hopes it could pave the way to ending a nuclear stand-off on the Korean peninsula.
US President Donald Trump and North Korean leader Kim Jong Un smiled for cameras after 41-minutes of one-on-one talks, just months after they traded insults and tensions spiralled in the region over the latter’s nuclear programmes.
Yet, there was some unease among investors about the outcome of the talks given the tense relations between the two nations. The combatants of the 1950-53 Korean War are technically still at war, as the conflict, in which millions of people died, was concluded only with a truce.
Trading was volatile as MSCI’s broadest index of Asia-Pacific shares outside Japan seesawed between positive and negative territory. It was last flat, while Japan’s Nikkei pared early gains to be up 0.2 percent from as high as 0.9 percent.
South Korean shares slipped 0.1 percent while Chinese shares were in the red too with the blue-chip off 0.4 percent. Australian shares were a tad firmer.
The lead from Wall Street was mixed overnight, with the Dow barely changed, the S&P 500 up 0.1 percent and the Nasdaq adding 0.2 percent.
Many analysts said the bar was pretty low for what will be deemed a successful summit, given the past failures in talks with North Korea.
“So today, we have the opportunity for a historic meeting, a possible end to the Korean war, and a possible move to denuclearise, and maybe even demilitarize the Korean peninsula,” said Robert Carnell, chief economist Asia-Pacific at ING.
“All of that’s great, but how can you make money from it. Well, the short answer is you probably shouldn’t even try.”
Carnell said the impact from an end to the nuclear stand-off and a possible end of sanctions on North Korea is likely to be “marginal” on future trade and corporate earnings.
Instead, he said, a far bigger “existential global threat” was the ongoing tariff dispute after Trump upset the Group of Seven’s efforts to show a united front, choosing to back out of a previous joint communique.
The action drew criticism from Germany and France, and Trump called Canadian Prime Minister Justin Trudeau “very dishonest and weak.”
G7 JOLT
However, “markets are generally shrugging off the G7 trainwreck,” said Ray Attrill, head of forex strategy at National Australia Bank.
Instead, they are looking ahead to a busy week.
Tuesday’s North Korea summit will be followed by policy meetings of the U.S. Federal Reserve, which is expected to raise rates, and the European Central Bank as well as a Brexit bill vote in the British parliament.
The greenback was well bid on Tuesday, with the dollar index up 0.2 percent against a basket of major currencies.
Against the safe haven yen, the dollar jumped to a three-week top of 110.49 in early deals. It was last at 110.18.
Helping calm markets were comments from Italy’s new coalition government that it had no intention of leaving the euro zone and planned to cut debt.
The euro stepped back from a three-week high of $1.1840 to be last down 0.2 percent at $1.1761.
In commodities, U.S. crude rose 10 cents to $66.20 per barrel, while Brent climbed 7 cents to $76.53.
Spot gold slipped 0.1 percent to $1,298.93 an ounce.
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Source: News18