Global risk sentiment remained sour this morning amid open political tensions between the US and other G7 countries ahead of today’s G7 meeting and pressure in key emerging market countries such as Brazil, notes the research team at Danske Bank.
Key Quotes
“Asian stock markets are retreating and the JPY is advancing. Overnight the White House announced that president Donald Trump will leave the G7 meetings in Canada early tomorrow morning to go to Singapore ahead of next week’s summit with North Korea’s leader Kim Jong-Un. The decision comes as president Trump yesterday accused French president Emmanuel Macron and Canadian Prime Minister Justin Trudeau of imposing ‘massive’ tariffs on the US and other non-monetary obstacles to sales of its products. Trump’s reaction came in response to signals from the French and German G7 delegations that they would be prepared to sign a communique without the US given disagreement on trade, Iran and climate change.”
“Meanwhile, Brazilian assets came under significant pressure yesterday. Political uncertainty ahead of the presidential election, including whether the well-respected central bank governor Ilan Goldfajn in the autumn coupled with general sour emerging market sentiment is putting Brazil under pressure. This prompted the central bank governor to stress yesterday that the Brazilian central bank has ample reserves and the fundamentals of the Brazilian economy are good but, at this stage, it would not consider an emergency meeting. At the same time, the IMF announced a USD50bn package for Argentina to strengthen investor sentiment.”
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