High anxiety on Trump-Kim, FOMC and ECB

US President Trump's weekend rampage across the geopolitical stage has caused widespread consternation but the market response is restrained thus far with most asset classes treading water and awaiting further developments. 

The G7 meeting (which some are dubbing G6-plus-one) saw Trump demanding the readmission of Russia, refusing to endorse the joint statement and picking a fight with Canada's Justin Trudeau, says John J Hardy, Saxo's Head of Forex Strategy. "As Raoul Pal says we're basically seeing the unwinding of the post-WWII global order in geopolitical terms. This is a huge shift," Hardy says.

However, the immediate market takeaways are a bit minimal with the Canadian dollar opening a tad weaker on uncertainty.

As far as equities are concerned, the most important issues is that Trump is planning to impose tariffs on imported auto parts.  "You should watch the German and the French manufacturers as these would be hit hardest by this" says Peter Garnry, Saxo's Head of Equity Strategy.

Elsewhere in market news, Italy's new finance minister says he wants Italy to stay in the euro and he also wants to reduce the country's debt. Hardy points out that these tasks seem at odds but nevertheless, Italy's 2-year yield is opening 40 basis lower, which is quite helpful for the euro ahead of this week's European Central Bank meeting. For rate expectations stateside, 85% to 90% of the market believes that this week will see the Fed raising interest rates.

On Brexit there's an important vote coming up which could become an existential flashpoint for Theresa May's Tory government should sufficient of her party colleagues vote against it. 

Finally today, it'll be a busy week also for commodities with important data releases from Opec and the EIA and, as Ole Hansen, Saxo's Head of Commodity Strategy says, "a rise in political meddling, making it  very difficult to gauge where crude oil is going next".

Gold remains glued to $1300/oz as a softer dollar and geopolitics offset nervousness ahead of the June 13 Fed rate hike. A break of either $1286 or $1308 would likely determine the near-term direction, Hansen concludes.