Log in Open account
Australia
Macro Digest: The art of a North Korean deal Macro Digest: The art of a North Korean deal Macro Digest: The art of a North Korean deal

Macro Digest: The art of a North Korean deal

Macro
Steen Jakobsen

Chief Investment Officer

So… the on/off Trump versus Kim meeting is on and it’s happening in Singapore, which means the open duel will be performed from 21:00 pm EST or 3:00 CET tonight/tomorrow morning.

Live coverage is available through Channel NewsAsia via YouTube.

President Trump needs this summit to work, probably more than does Chairman Kim, or as his official title reads: Respected Comrade Kim Jong Un, Chairman of the Workers’ Party of Korea, Chairman of the State Affairs Commission of the Democratic People’s Republic of Korea and Supreme Commander of the Korean People’s Army.

Trump entered the White House wanting to put his mark on history by creating peace in the Middle East . This concept/idea is now out of reach, and Trump’s focus has moved on to making the summit with North Korea his marker.

He also needs a victory in order to create and keep momentum on his dealmaker image as November's midterm elections nare drawing near.

Some investors I talk to go as far as to say that the president needs a deal on either North Korea or Iran to “live” beyond November. This is something I partly agree on (as incoming data clearly show).

The likely outcome

• Failure: getting “in the room” with Chairman Kim leaves Trump uneasy and talks end inside two hours
• Modest success: the bare minimum is an official US/North Korean truce (the 1950-53 war never officially ended).
• Success: North Korea agrees to monitoring and a limited reduction in long-range missiles; the US slightly eases sanctions.
• Big success: North Korea accepts full denuclearisation and monitoring in exchange for the US abolishing sanctions.

There are many problems in communicating progress on this front, one being the clear difference in how the US and North Korea define "denuclearisation". North Korea will only give up nuclear weapons if Washington meets certain conditions, which include removing American troops from South Korea.

In terms of the market's reaction to different scenarios, the biggest move is likely a risk-off swerve if the talks end in failure or if we see only modest success without hope for further talks. This could increase appetite for military intervention to penalise Chairman Kim, but for now somewhere neutral is the most likely outcome.

We will monitor the talks and don’t forget that after the “theatre” we have the European Central Bank and Federal Reserve meetings setting the agenda for monetary policy.

Some useful links explaining the US/North Korean summit

   • Surreal Trump-Kim summit defies diplomatic playbook (Politico)
   • Trump Kim summit: North Korea eyes 'new relationship' with US (BBC)
   • Trump's "great man" play on North Korea (Axios)
   • 'Denuclearisation' likely means different things to Trump and Kim Jong-un (NBC)
   • Trump needs a tough North Korea deal, but not because of Iran (Bloomberg)
   • Donald Trump’s demolition theory of foreign policy won’t work

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article

  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article

  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article

  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article

  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia
Products & pricing
Asset Management
    Platforms
    Accounts & service
    General
    Other
    Legal

    Trading can result in losses. Please ensure you understand the risks.

    The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

    Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

    Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

    Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

    The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

    Please click here to view our full disclaimer.