A slide to war with Iran?
Not yet taking Kim's bait
https://www.cnn.com/2019/05/10/politics/donald-trump-china-north-korea-venezuela-iran/index.html
2019-05-10 11:14:00Z
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A global stock market sell-off started to ease on Friday despite the U.S. fulfilling a promise to ramp up tariffs on Chinese goods.
The U.S. hiked tariffs from 10% to 25% on $200 billion worth of Chinese goods at 12:01 a.m. ET Friday. In response, Beijing said it "deeply regrets" the tariff hike and would take countermeasures — though no specifics were provided.
Markets across the globe initially fell overnight but were quick to bounce back and trade higher. In Asia, mainland Chinese stocks jumped with the Shanghai composite rising more than 3%. In Europe, the pan-European Stoxx 600 traded nearly 1% higher in early deals with the German DAX up by the same amount. Stateside, Dow futures initially slipped and pointed to nearly triple-digit losses at the open, but soon recovered.
Uncertainty over trade talks will linger, but some analysts believe investors are still optimistic that the world's two-largest economies will avoid a full-blown trade war.
"Investors seemingly continue to try to cling to hope that policymakers on both sides opt to deescalate," Deutsche Bank's research strategist Jim Reid said in a note Friday.
Reid noted that President Donald Trump told reporters Thursday that a "deal is still possible," and that he had received a "beautiful letter" from Chinese President Xi Jinping.
Global stock markets have seen heavy selling this week as the tension between Washington and Beijing escalated. The Dow Jones Industrial Average has fallen more than 650 points this week, while the S&P 500 has lost about 2.5%. Global equities have seen outflows of $20.5 billion in the past week, according to new research by Bank of America Merrill Lynch said on Friday.
The recovery could also be due to markets already pricing in the tariff hike. The announcement on the increase initially came from Trump on Sunday, giving investors plenty of time to position assets in their portfolios. In addition to that, a number of analysts have also pointed out that the increase in tariffs from 10% to 25% will only really take effect in a few weeks and hence markets are anticipating a deal will come before that.
Goldman Sachs told clients in a note that there is still some wiggle room in the negotiations, which are still set to continue on Friday.
"We note that details in the notice implementing the tariff hike indicate that exports that have already left Chinese ports before May 10 will not be subject to the increase," said Goldman economist Jan Hatzius.
"This creates an unofficial window, potentially lasting a couple of weeks, in which negotiations can continue and generates a 'soft' deadline to reach a deal ... This also leaves an opportunity for the two sides to reach an agreement in the next couple of weeks, though challenges remain," he added.
Russ Mould, an investment director at London-based stockbroker AJ Bell, said the market moves could be down to investors now having real facts with the formal tariff hike, which would dispel any speculation earlier in the week.
He also explained that a China retaliation will hurt U.S. businesses and consumers and have a negative impact on the economy. He added that the finger of blame would then point to Trump for being "too aggressive," noting that he cannot afford to let this happen ahead of elections next year.
"Investors could be betting that China's retaliation could force Trump to back down and come to an amicable conclusion," Mould said in his note.
Trade war? No problem.
Global markets largely rose on Friday just hours after President Trump escalated his trade war with China. The stock market in China, which sometimes gets a lift from state-run companies looking to buoy the market, led the global rise.
Futures that allow investors to bet on the performance of stocks in the United States indicated many believed Wall Street would open higher on Friday morning.
Early Friday, Mr. Trump raised tariffs to 25 percent from 10 percent on Chinese imports that are worth about $200 billion a year. He said the increase came in response to Chinese officials attempting to “renegotiate” a pact aimed at calling a trade war truce. China said it would respond with unspecified countermeasures.
Still, many investors believe the two sides can reach a deal, especially since the Trump administration effectively delayed the full brunt of the tariff increase. The Trump administration specified that it will collect the tariffs only on goods that leave China starting on Friday. That means they would not hit Chinese goods already on ships destined for the United States, though they would more immediately impact goods that are flown in.
“Our base case remains that the U.S. and China will eventually reach some kind of accord,” Mark Haefele, global chief investment officer for the Swiss bank UBS, said in a research note. “Both the U.S. and China have strong incentives to reach a deal and we do not expect a complete breakdown in negotiations.”
In China, the Shanghai Composite Index rose 3.1 percent, while the Shenzhen Composite Index rose 3.8 percent.
The Hang Seng Index in Hong Kong rose 0.8 percent.
In Japan, the Nikkei 225 index fell 0.3 percent after disappointing wage data there.
South Korea’s Kospi index rose 0.3 percent.
European markets opened modestly higher. In Germany, the DAX index was up 1 percent.
The CAC 40 index in Paris opened 0.9 percent higher.
Steven Jiang contributed to this report.
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North Korea fired two short-range missiles on Thursday, according to South Korean military, as the U.S. responded with an intercontinental ballistic missile test of their own just 10 minutes later.
The launch, the second such move in less than a week, occurred around 4:30 p.m. local time from the North’s Sino-ri missile base, the South’s joint chiefs of staff said in a statement. The base is located around 130 miles north of the border with South Korea. The missiles flew 260 and 170 miles respectively, according to South Korean military officials. The U.S. insisted the timing of their own test was entirely coincidental.
The base is believed to operate Rodong short- and medium-range ballistic missiles, according to the New York Times.
“The Sino-ri missile operating base and the Rodong missiles deployed at this location fit into North Korea’s presumed nuclear military strategy by providing an operational-level nuclear or conventional first-strike capability against targets located both throughout the Korean Peninsula and in most of Japan,” the Times quoted from a study published by analysts for the Center for Strategic and International Studies.
POMPEO DISMISSES NORTH KOREA'S REJECTION OF HIM AS US NEGOTIATOR
South Korea's presidential national security director, Chung Eui-yong, has been monitoring the situation and was communicating with defense officials and the JCS by video.
The firing comes five days after the North launched a barrage of short-range projectiles from its east coast. Through its state media, the North described the earlier firing as a “defense units” test of its rocket launchers and tactical guided weapons.
Thursday's firing comes as Trump's negotiator for North Korea, Stephen Biegun, visits Japan and South Korea to discuss North Korean denuclearization efforts.
US ENVOY: NORTH KOREA DENUCLEARIZATION MUST NOT BE INCREMENTAL
The U.S. Air Force, meanwhile, tested a long-range missile from Vandenberg Air Force Base in California within 10 minutes of the reported launch by Pyongyang. The American intercontinental ballistic missile flew 4,200 miles into Pacific from a base in California, according to the Air Force. The launch of the Minuteman III intercontinental missile was the second missile launch this month and the fourth this year.
Linda Frost, Deputy, Media Operations of the Air Force Global Strike Command, told Fox News that the timing of both the U.S. and North Korean tests were not related.
“It’s important to note that our test launch is not a response or reaction to world events. The launch calendars are built three to five years in advance, and planning for each individual launch begins six months to a year prior to the launch,” she said.
North Korea last conducted a major missile test in November 2017 when it launched an intercontinental ballistic missile that could demonstrate the potential capability to reach the U.S. mainland. Analysts have said if the North decides to resume testing banned ballistic weapons, it could signal the rogue nation is turning away from diplomacy.
Tensions between the North and the U.S. were somewhat soothed when North Korean leader Kim Jong Un and President Trump met for two summits. The second meeting in February ended abruptly when both sides disagreed over sanctions relief for the North. The U.S. did not believe the North was offering enough disarmament measures in order to grant widespread sanctions relief it sought.
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After Saturday's launches, Trump tweeted that Kim “knows that I am with him & does not want to break his promise to me. Deal will happen!”
Kim said he is open to a third meeting with Trump but set this year’s end as a deadline for Washington to offer mutually acceptable terms for an agreement.
Fox News' Lucas Tomlinson contributed to this report.
The Associated Press contributed to this report.