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Trump-Kim summit: what was agreed and what does this mean for the markets?

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Pens poised and enormous signatures prepared, Kim Jong-un and Donald J. Trump sat in front of US and Korean flags at the unprecedented summit in Singapore. The summit marked the first time a sitting US president met with a North Korean leader and represented a clear break from the past. This is history in the making.

By 8:30am this morning, the two global superpowers had signed a declaration which will, in Kim’s words, result in “a major change” on the world stage.

During the 38-minute meeting, Trump and Kim productively discussed topics including denuclearisation, the recovery of POW/MIA remains and US-DPRK relations. Alongside these were more unproductive ventures into human rights, something Trump describes as “briefly covered”.

Despite both leaders looking pleased with the outcome, they were hesitant to reveal the juicy details of their joint declaration. At a press conference following the meeting, Trump argued that he had “no time” for details today. However, the main points covered on the “pretty comprehensive” joint declaration have been revealed. At the present moment, the two countries have sworn to:

  1. Foster brand-new US-DPRK relations and work towards peace and prosperity, in the interests of their respective peoples
  2. Work together to form a stable regime on the Korean Peninsula
  3. Commit to the complete denuclearisation of the Korean Peninsula, reaffirming the Panmunjom Declaration made in April this year.
  4. Work together to recover the remains of prisoners of war and those missing in action from the conflict between North and South Korea, and repatriate those already identified.

Following the meeting, critics raised concerns about the agreement’s fulfilment. At the press conference, a reporter asked Trump how he planned to ensure Kim followed through with his promises. Trump’s response that “you can’t ensure anything” did little to quell the concerns, but he claimed that Kim was keen to make a deal. As the conference came to a close, the US president’s own doubts about the completion of the declaration began to show. He concluded with the cryptic remark that “if you don’t get the ball over the goal line, it doesn’t mean enough”.

Concerns are particularly centred on Kim Jong-un’s agreement to work towards denuclearisation. The commitment may not be as strong as Trump first asserted – it is not the complete, verifiable and irreversible dismantlement (CVID) that Washington have long been pushing for. The document makes no attempt to define ‘denuclearisation’, and the agreement looks exactly the same as that made in the Kim-Moon summit in April.

So, what does this mean for the markets?

As the details from the meeting were released, the markets were optimistic. Despite the agreement’s frailty, the promise of a stable relationship between the US and North Korea was reassuring to investors. Appetite for risk continues to increase as investors focus on the smooth US-DPRK relations, instead of the rocky ties between the US and its allies after the G7 summit.

The dollar approached a three-week high and Asian shares rose as the agreement was signed. Chinese shares gained and South Korean shares weakened slightly. Elsewhere, markets showed mixed reactions. European shares stayed around the flatline, with the pan-European Stoxx 600 remaining steady.

The market reactions almost guarantee that the US Federal Reserve will implement another lofty interest rate hike on Wednesday. Aside from that, little else is certain. In the aftermath of the summit, the US military denied receiving any confirmation of Trump’s promise to cancel its military exercises in Korea. Recent reports suggest that North Korea is continuing its hacking efforts against the South. The markets, and the world, must wait to see if the promises made in today’s historic declaration are upheld.

 

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