June 16, 2018

Global Market Effect on US-Korea Summit

Posted in Keith Knutsson tagged at 1:29 am by Keith Knutsson

The markets and economies have been expecting a significant impact from the highly anticipated meeting of the President of the United States, Donald Trump and the leader of North Korea Kim Jong-un.  These are potential results in the global economy and markets from the summit:

North Korea: If both countries continue to successfully take steps towards denuclearization, North Korea could open up for new business ideas and investment opportunities.

Currencies: The currencies pegged by the U.S. dollar could be impacted. For example, the UAE Dirham, Saudi and Qatari Riyal are just a few currencies pegged that would benefit from a strengthening U.S. dollar. High yielding currencies such as the South African Rand, Russian Ruble and the Mexican Peso rely on investor appetite towards taking on more risk. Investors should be wary, but also consider currencies like the African Rand to lead global markets. On the other hand, the Japanese Yen relies heavily on its safe-haven status for buying momentum. The summit played into the favor of a rise in the Yen as the meeting showed positive results.

Overall Stock Market: With uncertainty and trading speculation building up, the trading volume in global markets should see a major uptick. Nations closest to North Korea could benefit from emerging market engagements. Some markets include the Korean Won, Chinese Yuan and the Malaysian Ringgit.

Commodities: Buying sentiment for gold is highly reliant on market uncertainty and lower attraction towards safe haven assets would be seen as negative momentum for Gold.

Even though the summit has turned out to be successful, there can still be problems that emerge later on. If this occurs, there will be extreme market uncertainty which could negatively impact global stocks and in turn effect the emerging market currencies. Risk aversion will be important in times like this as investors are recommended to steer close of high-yielding currencies like the South African Rand. Overall the summit between the United States and Korea ended on a good note and the markets priced the result appropriately.

 

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