Trump – Kim Summit

What triggered the summit?

Since Trump became president over a year ago, there has been ongoing tension between himself and North Korea’s Supreme Leader, Kim Jong-Un. This came as the result of the several ballistic missile tests North Korea launched as an international warning. Despite the White House executing their ‘maximum pressure’ campaign, North Korea continued to retaliate by carrying out a sixth nuclear test and affirming the country held missiles that were capable of reaching America.

However, earlier this year relations between the two took a turn for the better as Trump accepted an invitation from North Korea’s Supreme Leader to meet in person. Although it wasn’t plain sailing, with Trump at one point calling off the summit entirely, the two eventually agreed to meet in Singapore on the 12th of June. Trump went into the meeting with hope of North Korea agreeing to irreversibly dispose of all nuclear weapons. This seemed more likely than ever following the announcement that Kim Jong-Un would like to grow North Korea’s economy by expanding to international investment.

The day of the summit

The summit saw success for both leaders. After shaking hands, meeting one-on-one and in a group, Trump and Mr Kim signed a document in which they agreed Washington will provide security guarantees to Pyongyang in exchange for denuclearisation in North Korea. At a press conference later that day, Trump said the US will stop joint military exercises in South Korea, which have been in place annually since 1970. However, US forces in South Korea reported to media that they had not received any orders to cut training and would continue their practise until told otherwise.

Of course stopping military exercises with South Korea came in exchange for North Korea agreeing to discontinue missile launches and nuclear tests. Yet many North Korea watchers have remarked that the summit agreement lacks substance and believe it is merely a recurrence of promises made by North Korea in the past. Reporters have said the terms could ultimately have been copied straight from other agreements with North Korea. Looking forward, only time will tell if such promises will be kept.

Market reaction

Global markets showed little response to the summit, with investors cautioning against getting too optimistic. Few thought the agreement would have a great impact due to the lack of key details. US stocks went up marginally on the day of the summit, with the S&P closing up 0.2%, Japan went up 0.3% and Hong Kong went up 0.1%. However, stocks in Europe declined slightly, falling by 0.1%.

South Korea’s Kospi 200 index declined by 0.1% on the day. However, this could have been the result of sensitivity to global trade since half their revenue comes from overseas. Of greater significance was Busan Industrial Co, a construction company, which was down by roughly 10%. This came as numerous investors previously anticipated the potential of opening up of North Korea.

Shares of US defence companies came under pressure after the summit. Shares of the worlds biggest defence organisation, Lockheed Martin Corp went down by 1.3%. Manufactures of weapons also noticed falls. Back in 2017, the possibility of a nuclear war caused gold prices to rise, so Tuesday saw gold prices fall by 0.3%. The dollar went up against the Japanese Jen by only 0.3% and yields on 10-year Treasury’s were unaffected.