Market buzz: Trump-Kim talks moving faster than expected, pound slips on industrial data

1635: Italian 10-year bond yield just off its session lows, down by 30 basis points at 2.83%.

1535: Trump will be leaving Singapore 15 hours earlier than initially planned.

The White House says Trump will leave at around 8pm on Tuesday as talks between the US and North Korea "have moved more quickly than expected".

Spreadex analyst Connor Campbell points out that markets are taking the news in their stride.

"While no pre-summit jitters have sunk it just yet, tomorrow could be a completely different story, as European investors wake up to the first round of dispatches from Singapore. They’ll also be the UK jobs report to contend with, as the pound looks for wage growth to resume the growth that has stalled in the last couple of months," he says.

1532: US medical technologies firm Stryker has made a takeover approach to Boston Scientific, the Wall Street Journal reports.

1529: Jaguar Land Rover, which is owned by India's Tata Motors, is moving all production of its Discovery 4x4 vehicle from the UK to Slovakia early next year.

1444: The recent strength of global markets has been down to the outsized share of global equity dividends paid in April and May, which coincides with strong seasonality, says Morgan Stanley, but that's behind us now and market performance from June through September tends to be weaker than average, the less snappy data-backed version of the 'sell in May and go away' adage. In dollar terms, April/May represents a roughly US$300bn cashflow back to equity investors, and a helpful technical support.

"We are now past the equity carry season: This is now behind us. Dividends in most markets drop off significantly starting in June. Meanwhile, market performance from June through September tends to be weaker than average, with June seeing the lowest instances of positive returns of any month," MS says in a cross-asset note.

Asia is an exception, with A-shares in China, the Hang Seng and Taiwan's TAIEX paying a significant share of their dividends between June-August, and seeing better-than-average performance during these months. "Our equity strategists are OW China within EM equities, and we are long A-shares versus EM equities within our top trades.

Meanwhile, Goldman Sachs wonders, we have to hope with tongue in cheek, if trends in the financial market have read-across to the World Cup, which, did you know, starts this week. Anyone going to follow Goldman's thinking and bet on more goals in the WC final due to the uptick in global rates?

No, Goldman. No. pic.twitter.com/L5KmphiDnQ

— Tracy Alloway (@tracyalloway) June 11, 2018

1405: The yield on 10-year Italian government bond is dropping 27 basis points to 2.86%, although they remain well above the 2.02% from where they started the year.

In parallel, the yield on the benchmark two-year note is tumbling by 64 basis points to 1.038%.

Triggering the moves, at the weekend the country's finance minister, Giovanni Tria, told Corriere della Sera there had been no discussion of Italy abandoning the euro and that the government would act against market conditions that might the country push towards such a scenario.

Meantime, the yield on the benchmark 10-year US Treasury note was edging up by one basis point to 2.96%.

1141: UK trade with the US has worsened such as to show the weakest trade balance since 2002, notes Barclays, also highlighting that second-quarter GDP trackers are so far pointing to growth of around 0.3%.

1127: Sterling is down 0.44% against the dollar at 1.3356. In a week littered with a UK jobs report, inflation and retail sales readings, Federal Reserve and ECB meetings and a historic summit between the US and North Korea, market analyst Connor Campbell notes the pound has fallen at the very first hurdle.

"With fingers pointed at everything from Brexit woes to trade war concerns, the UK’s manufacturing production saw the biggest month-on-month drop in more than five years...Understandably the pound, already feeling rather fragile, wasn’t elated by all this. Against the dollar it reversed its initial gains to fall 0.3%, quickly sending it back to $1.337; against the euro, meanwhile, it slipped half a percent, that loss forcing it below €1.134 and towards the bottom end of its recent trading bracket."

Looking across to Wall Street, Campbell says the Dow Jones "looks a bit reticent" with the futures suggesting a small 0.2% increase after the bell.

"Yet, that would still see the Dow hit a fresh three-month peak, and allow it to carry over last week’s rally – a rally that has investors’ eyes shut and fingers in their ears at both the global trade tensions and the likelihood of a Fed rate hike on Wednesday."

1122: The UK industrial data "could fuel Bank of England concerns and uncertainties over the economy", says Howard Archer of the EY Item Club, saying "there can be very little doubt that the Monetary Policy Committee will leave interest rates unchanged at their June meeting next week".

"The data also makes an August interest rate hike by the Bank of England look a lot more questionable."

1009: The surprise fall in industrial production in April suggests that the sector is "still struggling to pick up pace after a weak Q1", said Andrew Wishart at Capital Economics, but the construction sector looks to be "starting to turn a corner".

Sam Tombs at Pantheon Macroeconomics says the production and construction data "cast considerable doubt" over whether quarter-on-quarter GDP growth will rebound in Q2 and meet the Bank of England’s 0.4% forecast.

"If output in both sectors hold steady in May and June, they will collectively subtract 0.20pp from quarter-on-quarter GDP growth. Surveys suggest that the services sector is enjoying only moderate growth, so GDP looks set to undershoot the Committee’s projection."

The most worrying development is the 1.4% month-to-month drop in manufacturing output, the biggest fall since October 2012. "We doubt that March’s heavy snow is to blame; we see no evidence of a delayed impact following previous episodes of bad weather. Note too that output in the energy supply sector, which fell by 2.0% month-to-month in April, likely will fall further in May, because average temperatures were even further above their seasonal norm. Accordingly, we aren’t pinning our hopes on a strong rebound in production in May."

0935: Disappointing data for the UK, as the Office for National Statistics reveals that industrial production in April fell 0.8% compared to the previous month, when it was expected to rise 0.1%, the same as in March. Year-on-year IP was up 1.8%, after a 2.9% rise the month before and well short of the 3.1% that economists had predicted.

Manufacturing production was down 1.4% month-on-month in April, worsening from the 0.1% fall a month before and some distance from the 0.3% consensus forecast. Year-on-year manufacturing production was up 1.4% from 2.9% a month earlier and versus a 3.1% average estimate.

0927: Shares in Hargreaves Lansdown are up this morning despite the boss of US low-cost fund giant Vanguard saying the fund industry price war is here to stay. Vanguard's new online-only service added pressure on competitors to cut fees at a time when the traditional “active” funds sector has struggled because of the rising popularity of cheaper index funds.

Water companies such as Pennon and United Utilities are also higher as reports emerge from the sector that Labour has discussed a mutualisation-style approach. Although Labour has made forceful public statements on renationalising water, energy and rail, Pennon's CFO Susan Davy implied the tone has softened. “They’re pretty consistent in the way they’re talking about it in the media. But behind the scenes we’re beginning to see a bit more differentiation in how they’re talking about it,” she said in an interview with financialdirector.co.uk.

0910: These are unpredictable times for the UK but there is "light at the end of the tunnel" says Michael Stanes, investment director at Heartwood Investment Management.

"Our view is that the UK’s challenges are economic as well as political, something which has been reflected in the relative underperformance of UK equities vis-à-vis global indices.

"From a structural point of view, the UK economy appears to have made little progress over the past couple of years. While the manufacturing sector has seen some benefit from the post-referendum devaluation of sterling, it remains a small part of the economy and has not lifted the UK as a whole. The consumer has also been under pressure, responsible for weak retail sales data and declining domestic car sales, with incomes squeezed by rising inflation and a lag in wage growth.

"There is, however, some light at the end of that particular tunnel. We believe that headline inflation has passed its peak at the same time that wages in the UK, while not accelerating rapidly, are at least moving in the right direction. Our view is that disposable incomes will start to pick up from here, easing the squeeze on household."

0821: In some broker note action, Goldman Sachs has upgraded Ocado to 'buy', Deutsche Bank has downgraded Experian and Rio Tinto both to 'hold', and RBC Capital Markets has upgraded Just Eat to 'outperform'.

Liberum is again pushing ITV's attractions, upping its share price target to 275p from 265p and reiterating its 'buy' recommendation.

RBC also looks at Inmarsat, after Echostar's approach on Friday's that "puts Inmarsat clearly into play"; analysts have raised their price target from 725p to 850p.

0810: Inmarsat shares are rocketing higher, up 11% to 525p after it's announcement after markets had closed on Friday.

Inmarsat revealed it had received and rejected a "highly preliminary" and takeover proposal from US satellite giant Echostar Corporation.

The FTSE 250-listed company said its board had "carefully" considered the indicative proposal with its advisers and rejected it "on the basis that it very significantly undervalued Inmarsat and its standalone prospects".

0803: The FTSE opens up 24 points or 0.3% at 7,705.44, following Asia's lead.

0758: Markets appear deaf at present to rumblings of a trade war, says Neil Wilson of Markets.com.

After a stormy G7 meeting, Donald Trump's brinkmanship, he said, "may ultimately end up working to the advantage of the US; but it is also likely to depress investor sentiment, and therefore growth through the second part of 2018," Wilson says. "Nevertheless, expectations coming into the event were exceptionally low and so there has been little negative reaction in the markets so far."

The Singapore meeting between Trump and Kim Jong Un and the prospect of North Korea 'denuking' could drive risk appetite, Wilson said.

0747: Central bank week offers no shortage of market drivers in the 'mother of all weeks' ahead, with the Federal Reserve, European Central Bank and Bank of Japan all in action. Whilst the Fed is expected to hike, and the BoJ certain to stand pat, there is a good deal of anticipation ahead of the ECB meeting as markets await a potential announcement on QE tapering.

Despite the headlines from the G7 shambles, investors are more focused on the upcoming central bank’s meeting this week, says Naeem Aslam at ThinkMarkets, with these meetings driving most of the trading action for the forex markets "as long as Trump keep things calm on his Twitter account".

Aslam says the US are likely to increase interest rates. "This would be the second interest rate hike for this year and the only question which investors would be asking is: how many more interest rate hikes are in the pipeline? Increase in the interest rate would surely spur the rally for the dollar index but what matters most is that how the Fed view the economic health of the country given that there is some serious rift between the US and its important allies."

The Fed is unlikely to sound any more prepared to accelerate tightening this year, says analyst Neil Wilson at Markets.com, and will reiterate the 'asymmetry' mantra that allows a temporary overshoot on inflation this year.

"But the strength of the labour market could still result in more hawkish language around employment and wages that could support expectations for a fourth hike this year and be USD-supportive. Meanwhile we've had some hawkish noises from the ECB but the complications facing it in exiting QE quickly are significant. Expect Draghi to say the governing council discussed the end of QE, teeing up a formal announcement in July. Rate hike expectations could get pushed back to end of 2019 again having come forward a touch last week, which could push the euro back down to 1.15 again."