Tuesday’s session started off on the back foot, with the Euro first sliding on Draghi’s dovish comments before Europarliament on Monday where he signaled no imminent change to ECB’s forward guidance coupled with a Bild report late on Monday according to which Greece was prepared to forego its next debt payment if not relief is offered by creditors, pushing European stocks lower as much as -0.6%. However the initial weakness reversed after Greece’s Tzanakopoulos denied the Bild report, sending the Euro and European bank stocks higher from session lows. S&P futures are fractionally lower, down 3 points to 2,410.

Elsewhere, the Japanese yen rallied after strong retail sales data while US Treasuries ground higher after returning from a long weekend largely unchanged; Australian government bonds extend recent gains as 10-year yield falls as much as four basis points to 2.37%. Asian stock markets and were modestly lower; Nikkei closed unchanged despite a stronger yen. China and Hong Kong remained closed for holidays while WTI crude was little changed.

Despite the rebound, the Stoxx Europe 600 Index declined a fourth day as data showed that contrary to expectations of a record print, euro-area economic confidence fell for the first time this year, and as Draghi’s dovish comments to the European Parliament weighed on banking shares. As discussed yesterday, Italian bonds edged lower as traders digest the prospect of an earlier-than-expected election.

As Bloomberg politely explained, the overnight pullback across several assets serves as a reminder that, while equity benchmarks across the world have posted repeated records this year, potential headwinds to the global growth story remain and investor concern lingers. Or, in other words, selling is still not illegal. Elections in the U.K., Germany and Italy are looming as Brexit negotiations begin, while in the U.S. President Donald Trump’s ability to implement spending and tax-cut plans is far from certain. Speaking on Tuesday, St. Louis Fed President James Bullard said the new administration will need to fulfill the expectations that have driven the stock market higher, unless of course, the same Bullard suggests that QE4 is on the table next in which case the market will rise even higher.

“Washington does have to deliver at some point,” Bullard said in an interview on Bloomberg TV in Tokyo. “That is a concern going forward, whether the honeymoon period would end at some point and maybe the reality of American politics would settle in.”

Looking at global markets, Japanese stocks ended higher despite a stronger yen, with the Topix reversing earlier losses. Data showed Japan’s jobless rate stayed at the lowest in more than two decades last month, but household spending remained in a slump while retail sales came in stronger than expected. Hong Kong and China markets were shut for a holiday.

The Stoxx Europe 600 Index declined 0.2 percent. Futures on the S&P 500 Index fell 2 points, or 0.1%, to 2,411. The S&P cash index closed at a new record high on Friday.

In currencies, the euro traded little changed at $1.1167 as of 6:16 a.m. in New York. The British pound added 0.2 percent. The Bloomberg Dollar Spot Index was little changed. The yen strengthened 0.2 percent to 111.06 per dollar. The rand retreated 0.9 percent, extending losses for a second session after President Jacob Zuma survived a bid by some members of his party to oust him.

Accross commodities, West Texas oil dipped back under $50, falling 0.6% to $49.52 per barrel; prices swung last week following the agreement by OPEC and its allies to extend cuts by nine months.

On the U.S. calendar, we get personal spending, personal income, consumer confidence, Dallas Fed index, S&P/Case-Shiller home price, but according to SocGen, “today’s data will all be forgotten by the end of the week, with US ISM on Thursday and the labour market report on Friday more likely to stick in memories.”

Market Wrap

• S&P 500 futures down 0.1% at 2,411
• Nikkei 19,677.8, down 0.02%
• Stoxx 600 390.36, -0.24%
• Equities: CAC 40 (-0.9%), FTSEMIB (-0.8%)
• WTI $49.50, down 0.6%
• Brent futures down 0.8% to $51.87/bbl
• Gold spot down 0.2% to $1,265.10
• U.S. Dollar Index up 0.1% to 97.54

Bulletin Headline Summary from RanSquawk

• European equities enter the North American crossover modestly lower as UK and US return to market
• Risk drivers minimal from what we can evaluate, with the Greek payment opt-out story prompting modest flow out of EUR/JPY, and pulling USD/JPY below 111.00 as a result.
• Looking ahead, highlights include German regional & national CPIs, US Personal Spending, PCE data

Top Overnight News from Bloomberg

• Federal Reserve Bank of St. Louis President James Bullard said that at some point the honeymoon period will come to an end and Washington will need to deliver on the policy expectations that have driven the stock market higher
• Federal Reserve Bank of San Francisco President John Williams sees a “much smaller” Fed balance sheet in about five years, at the end of an unwinding process that could start with a “baby step” later this year
• First Data Corp. said it will buy CardConnect Corp. for $750 million, in what CEO Frank Bisignano called his company’s biggest acquisition since 2004
• Citigroup Inc. agreed to sell its fixed-income analytics and index business to London Stock Exchange Group Plc for $685 million in cash following a strategic review of the unit
• Goldman Sachs Group Inc. was denounced by the head of Venezuela’s legislature over a report that the bank bought $2.8 billion of bonds from that country, potentially helping President Nicolas Maduro’s administration amid accusations of human-rights violations
• Euro-area economic confidence fell for the first time this year, led by weaker readings in the services and retail sectors
• Akzo Nobel NV successfully dodged a legal challenge by activist shareholder Elliott Management Corp. to oust Chairman Antony Burgmans, strengthening the Dutch paintmaker’s hand in rebuffing takeover talks with a U.S. suitor

Asian equity markets traded subdued after market closures in UK and US, while participants in mainland China, Hong Kong and Taiwan remained absent for the Dragon Boat Festival. This lack of demand weighed on risk sentiment in the region, although ASX 200 (+0.8%) staged a late recovery amid gains in financials and resources, while Nikkei 225 (-0.1%) was pressured by a firmer JPY. Furthermore, political concerns in Europe also added to the cautious tone after Greece hinted at a default after it threatened to opt out of the next payment, while there were also reports that UK PM May was prepared to leave the EU without a deal. Finally, 10yr JGBs were slightly higher on safe-haven demand, although upside was capped following the 2yr JGB auction in which the b/c and accepted prices declined from the prior month.

Top Asian News

• Singapore Fines Credit Suisse, UOB After 1MDB-Linked Probe
• Reliance Communications Extends Tumble on Concerns Over Debt
• Japan Stocks to Watch: Mizuho, Square Enix, Rohto Pharmaceutical
• Goldman-Backed Games Startup Aims for Vietnam’s First IPO Abroad
• Japan Equity Movers: SoftBank, Hitachi Chem, Itoham, HIS, DeNA
• Abe’s Coalition Ally Warns Military Shift Could Rile Neighbors
• Asia Stocks Mixed, Euro Falls on Draghi Comments: Markets Wrap
• Japan’s Topix Advances in Thin Trading as Volatility Declines

In Europe, risk off sentiment filtered into the market following the long weekend in the US and UK. Despite Europe being open for trade yesterday, with negative news circulating today, noticeably, the Euro’s overnight pressure extending into European trade, amid reports that Greece could opt out of their next payment, if creditors fail to agree on debt relief, however which was later denied by a Greek Government spokesman Political news continues to dictate trade, with whispers of an early Italian election being followed by comments from UK PM May, stating that the government is prepared to leave the EU without a deal. An aftermath of the first Prime Minsters debate has been evident, with both candidates coming out seemingly unconvincing. Polls have continued to tighten in the UK, with opposition leader Jeremy Corbyn stating that if he is elected, he will make sure there is a Brexit deal, however, the conservatives remain in a convincing lead in the polls. Airline names underperform in the European morning, with British Airways’ parent company, IAG weighing on the FTSE following the IT failure, which hit over 300,000 passengers over the weekend. Financials underperform, stemmed by a downgrade on European banks by Deutsche Bank, with the sector down near 1%. The recent bounce in GBP has also not helped the FTSE, with GBP/USD finding some support around 1.28, trading at session highs. The risk off sentiment has been noted in the JPY with demand notable, as USD/JPY was briefly led below 111.00 once again.

Fixed income markets have slowed down following yesterday’s bullish pressure, however still reside near session highs. Gilts have been noticeable, with the UK lOy spiking to new contract highs on the open. German paper has failed to continue the bid seen yesterday, trading marginally in the red around the intra-day 162.17 base. The lOy yield spread has narrowed slightly to 70.2bps, following the 9 month low seen last week.

Top European News

• Italy Moves Toward Early Elections as Voting Rules Deal Nears
• EU Demands for Citizens ’Ridiculously High,’ U.K.’s Davis Says
• Merkel Signals New Era for Europe as Trump Smashes Consensus
• RBS Unit Tells Euro-Long Clients Their Bullishness Is Premature
• Greece Denies Bild Report Country Would Reject Payment
• Deutsche Bank Downgrades European Banks, Tech; Upgrades Energy

In currencies, the euro traded little changed at $1.1167 as of 6:16 a.m. in New York. The British pound added 0.2 percent. The Bloomberg Dollar Spot Index was little changed. The yen strengthened 0.2 percent to 111.06 per dollar. The rand retreated 0.9 percent, extending losses for a second session after President Jacob Zuma survived a bid by some members of his party to oust him. Risk drivers minimal from what we can evaluate, with the Greek payment opt-out story prompting modest flow out of EUR/JPY, and pulling USD/JPY below 111.00 as a result. Indeed, the JPY has made ground across the board, with the commodity currencies also suffering a little. China’s absence hits metals price, and this has weighed on AUD and NZD but modestly so.  GBP is fighting back a little as the recent narrowing in the election polls saw the Pound taking a hit late last week. Cable has come back into the mid 1.2800’s, while the EUR cross rate dips into the mid 0.8600’s, but traders will be wary of (more) month end flow hitting the later at some stage today and tomorrow.

In commodities, drivers have been overlapping in recent sessions, with the rise in Oil prices into the OPEC/non OPEC meeting last week, largely supportive of a risk on mood. This saw metals prices rising, pushing the lead Copper ‘benchmark’ up to USD2.60. Oil has since dropped back to test the low USD48.00’s in WTI, while Brent has also been reined in, but was well contained below USD51.00. WTI is now pivoting on USD50.00, but Copper is back testing the support levels from USD2.50. On the day, only Silver, Nickel, Tin and Palladium showing (small) gains on the day. Gold is still showing better levels, but has retraced from the USD1270 highs seen earlier.

Looking at today’s calendar, we will get a first look at how consumer spending is looking in Q2 with the April personal income and spending reports (the latter expected to increase +0.4% mom). We will also receive the April PCE core and deflator readings where a modest +0.1% mom rise in the core is expected. Following that we’ll get the March S&P/Case-Shiller house price index before we then get the May consumer confidence reading (expected to decline 0.5pts to 119.8) and finally the Dallas Fed’s manufacturing survey for May. Away from the data, this evening at 1pm we are due to hear from the Fed’s Brainard who has sounded a little more positive of late.

US Event Calendar

• 8:30am: Personal Income, est. 0.4%, prior 0.2%; Personal Spending, est. 0.4%, prior 0.0%; Real Personal Spending, est. 0.2%, prior 0.3%
  • PCE Deflator MoM, est. 0.2%, prior -0.2%; PCE Deflator YoY, est. 1.7%, prior 1.8%
  • PCE Core MoM, est. 0.1%, prior -0.1%; PCE Core YoY, est. 1.5%, prior 1.6%
• 9am: S&P CoreLogic CS 20-City MoM SA, est. 0.9%, prior 0.69%;  NSA, est. 5.61%, prior 5.85%; CS 20-City NSA Index, prior 193.5
• 10am: Conf. Board Consumer Confidence, est. 119.8, prior 120.3; Present Situation, prior 140.6; Expectations, prior 106.7
• 10:30am: Dallas Fed Manf. Activity, est. 15, prior 16.8
• 1pm: Fed’s Brainard Speaks on Economy, Monetary Policy in New York

DB’s Jim Reid concludes the overnight wrap

Back after a long and often rainy bank holiday weekend. We used some of the extra time to watch our first film of the year – LaLa Land. I really enjoyed it. In fact it’s undoubtedly the best ever Oscar winning film for 5 seconds that I’ve ever seen. Moving from the big to the small screen, if you’re exhausted at the drama surrounding the current US political administration and want something more boring and mainstream then today is your lucky day as season 5 of House of Cards lands on Netflix. Enjoy. I’m off to a conference in Germany so it’ll have to wait for my return.

Staying with politics, on a day of holidays in the US and UK, Italian election anticipation was the main story to disturb the quiet. All the talk was about a possible new electoral system in Italy which could allow an election to take place as soon as this autumn, rather than waiting until 2018. In an interview with Il Messaggero, former PM Renzi said that Italy voting at the same time as Germany this autumn “would make sense for many reasons”. Renzi said that he favoured a German-style electoral system based on proportional representation and that while this would not be a solution to all problems, the system “would be a step forward in overcoming the current stalemate” and so removing obstacles to snap elections and thus removing the need to wait until 2018. Over the weekend anti-establishment 5-Star supporters overwhelmingly backed a proportional law modelled on that of Germany in which parties must secure at least 5% of votes to get into parliament.

Up until a few noises in this direction last week, Italian politics had been looking more like an early 2018 story however clearly the risk now is that this is brought forward to the autumn. Germany’s federal election is scheduled for September 24th. Remember also that Italy is still to pass its budget law, due in October, which has the potential to complicate matters. There is also the not so small issue of Italy’s banking system woes which still need to be taken care of. With regards to polling, the overall theme is that it is very tight and the gap at the top within the margin of error. Of the last 10 opinion polls conducted since May 18th, the Democratic Party (PD) leads in 6 and the Five Star Movement (5SM) leads in 4. However the margin between the two parties is anywhere from +/- 2%. It’s worth noting that only 2 other parties (Forza Italia and Lega Nord) qualify for the >5% cut-off based on recent polls. This all raises the possibility of a hung parliament.

In an otherwise quiet day for markets it was the underperformance in  Italian assets which easily stood out. While the Stoxx 600 (-0.03%) finished more or less flat, the FTSE MIB tumbled -2.01% while Italian Banks closed down -3.51%. 10y BTP yields were also 8.6bps higher while Bunds and OATs were 2-3bps lower. The Euro (-0.17%) traded sideways for much of the session however we have seen it dip -0.32% in the early going this morning.

The slightly stronger performance for core government bond markets in Europe yesterday perhaps reflected a slightly dovish tone from ECB President Draghi. Speaking at a hearing at the European Parliament in Brussels, Draghi said that “we remain firmly convinced that an extraordinary amount of monetary policy support, including through our forward guidance, is still necessary”. This was put in the context of underutilized resources being re-absorbed and for inflation to return to and durably stabilize around levels close to 2%. Draghi did note a measureable reduction to downside risks and tail risks which Europe faced at the end of last year as receding measurably. ECB Governing Council Member Nowotny also spoke yesterday and said that he see’s “positive news” on growth but that on the other hand he still needs to see evidence that this is sustained.

The Bundesbank’s Weidman also said that “in light of subdued price pressures, an expansionary monetary policy continues to be appropriate in principal”. Over at the Fed meanwhile San Francisco Fed President John Williams spoke again although much of the speech was a repeat of comments recently. Williams said that he sees a “much smaller” balance sheet in years ahead and that the unwinding could begin with a “baby step” later this year. Early this morning the dovish St Louis Fed President James Bullard also spoke with the most notable takeaway being a fairly frank assessment of Trump’s administration. Bullard said that “Washington does have to deliver at some point and I think that is a concern going forward, whether the honeymoon period would end at some point and maybe the reality of American politics would settle in”. He added that “we’ll see if that happens or not” and that “I think the jury is out”.

Away from Central Bank speak t he latest CSPP numbers out yesterday showed a surprisingly high amount of corporate purchases last week. The average daily purchases of €452mn was well above the average of €367mn since the program started. The CSPP/PSPP ratio was 20% (vs. 17.2%, 12.6%, 10.7% and 8.7% in the previous four weeks). Since QE was trimmed in April the CSPP/PSPP ratio has been 13.7%, up from 11.6% between July 2016 and March 2017. So after a few weeks where it looked like an equal taper it seems that corporates are being tapered less for now. The ECB has certainly not been predictable on this though.

This morning in Asia it’s been another fairly directionless session, characterised again by thin volumes with markets in China closed for a second day. The Nikkei (-0.54%) and Kospi (-0.46%) are both weaker, however the ASX (+0.24%) is slightly firmer. The Hang Seng is shut along with bourses in China. Commodities have for the most part traded sideways while Asian currencies are a little softer. Macro data this morning was reserved for Japan where April retail sales (+1.4% mom vs. -0.2% expected) rose surprisingly, while the jobless rate held steady at 2.8%.

Before we look at the day ahead, we are yet to hear of any polls post last night’s TV Q&A between PM Theresa May and Labour leader Jeremy Corbyn. While both faced challenges with the current PM questioned on recent u-turns, the candidates seemingly came away unscathed. Prior to the Q&A a survation poll conducted over May 26-27 confirmed some of the recent trend with the Conservatives lead shrinking to just 6% at 43%-37%, from 9% on May 19-20 and 18% on May 12-13. We did a thorough recap of the UK polls in yesterday’s EMR for those interested.

Looking at today’s calendar, we’ve got a fair few data releases to get through today. This morning in Europe we’ll be kicking off in France where the latest consumer confidence and consumer spending reports are due, along with the preliminary release of Q1 GDP. Following that we’ll get May confidence indicators for the Euro area before a first look at the May inflation reports this week with Germany first up. This afternoon in the US we will get a first look at how consumer spending is looking in Q2 with the April personal income and spending reports (the latter expected to increase +0.4% mom). We will also receive the April PCE core and deflator readings where a modest +0.1% mom rise in the core is expected. Following that we’ll get the March S&P/Case-Shiller house price index before we then get the May consumer confidence reading (expected to decline 0.5pts to 119.8) and finally the Dallas Fed’s manufacturing survey for May. Away from the data, this evening at 6pm BST we are due to hear from the Fed’s Brainard who has sounded a little more positive of late. The ECB’s Liikanen is also due to speak this morning.

One month ago, when we first discussed that in addition to the CVN-70 Carl Vinson aircraft carrier group, the US was deploying two more carriers toward the Korean peninsula, some took the Yonhap-sourced report skeptically: after all, what’s the incremental symbolic impact of having three, or even two aircraft carriers next to North Korea when just one would more than suffice. Then, two weeks ago, the report was proven half right when US officials announced that in addition to the first US carrier already on location, the US Navy is moving the USS Ronald Reagan aircraft carrier to the Korean Peninsula, where it would conduct dual-carrier training exercises with the USS Carl Vinson.

Aircraft carrier CVN-76 Ronald Reagan

After completing its maintenance period in Yokosuka, Japan, the USS Ronald Reagan departed for the Korean Peninsula on Tuesday, according to the Navy. “Coming out of a long in-port maintenance period we have to ensure that Ronald Reagan and the remainder of the strike group are integrated properly as we move forward,” Rear Adm. Charles Williams said in a press release.  Once it arrives in the region, the carrier will conduct a variety of training exercises but primarily focus on certifying its ability to safely launch and recover aircraft, the service said. In other words, training for combat missions involved the North Korean capital.

We concluded our report from mid-May by saying that the US Navy may soon “further deploy the CVN-68 Nimitz, which was the third carrier reported to be eventually making its way toward Korea.”

We didn’t have long to wait, because on Friday the Kitsap Sun confirmed what we reported initially over a month ago, namely that the USS Nimitz will depart Naval Base Kitsap-Bremerton on Thursday on its first deployment since 2013. Official details of the deployment were hazy, with spokeswoman Theresa Donnelly saying that The Nimitz-class aircraft carrier is expected to be in the western Pacific for six months with visits to the Middle East and Asia-Pacific, “though plans could change in response to world events.”

However, a subsequent report from VOAnews confirms that the ultimate destination is none other than the country the US will almost certainly attack next, North Korea:

The United States is sending a third aircraft carrier strike force to the western Pacific region in an apparent warning to North Korea to deter its ballistic missile and nuclear programs, two sources have told VOA. The USS Nimitz, one of the world’s largest warships, will join two other supercarriers, the USS Carl Vinson and the USS Ronald Reagan, in the western Pacific.

The Nimitz will lead Carrier Strike Group 11, which includes guided-missile destroyers USS Shoup and USS Kidd from Naval Station Everett, guided-missile destroyers USS Howard and USS Pinckney and guided-missile cruiser USS Princeton from San Diego, and a conglomeration of aircraft squadrons that comprise Carrier Air Wing 11, including Naval Air Station Whidbey Island-based Gray Wolves of Electronic Attack Squadron 142.

Aircraft carrier CVN-68 Nimitz

After returning from its last deployment, the Nimitz underwent a 20-month maintenance and modernization period at Puget Sound Naval Shipyard that was completed in October. It has spent most of the past seven months at sea undergoing training and inspections in preparation for deployment. Now the ship and crew are ready to go, said commanding officer Capt. Kevin Lenox.

“I am so incredibly proud of the entire Nimitz team and the terrific coordination and support across the entire strike group, especially in such a condensed training cycle,” he said in a news release. “The crew stepped up to the plate, and I’m confident we’re ready to meet whatever challenges lie ahead on our upcoming deployment.”

While it is rare for the U.S. military to deploy two carriers in the same region at the same time, it is almost unheard of to have three aircraft carriers in close proximity to each other absent current or imminent military action. Which may be the case soon: as VOA notes, North Korea’s growing nuclear and missile threat is seen as a major security challenge for Trump, who has vowed to prevent the country from being able to strike the U.S. with a nuclear missile.

Sitting alongside Japanese Prime Minister Shinzo Abe, Trump said on Friday prior to the start of the G-7 meeting in Sicily that world leaders would have a “particular focus on the North Korea problem.” The White House issued a statement on Friday which said the two leaders have agreed to “enhance sanctions on North Korea” in an attempt to prevent the further development of North Korea’s ballistic missile and nuclear programs.

Meanwhile, as reported on Friday, the U.S. military will test a system to shoot down an ICBM for the first time next week. It is intended to simulate a North Korean ICBM aimed at the U.S. The Missile Defense Agency said it will test an existing missile defense system on Tuesday to try to intercept an ICBM. The Pentagon has used the Ground-Based Midcourse Defense (GMD) system to intercept other types of missiles, but never an ICBM. The GMD has been inconsistent, succeeding in nine of 17 attempts against missiles without intercontinental range capability since 1999.

So, perhaps as a contingency plan, the US will soon have not one, not two, but three aircraft carriers in the proximity of the Korean peninsula “just in case.” The trip from Naval Station Everett is expected to take several weeks. Meanwhile, here is the latest deployment of US naval forces around the globe as of May 25, courtesy of Stratfor.

With Trump back from his trip, and speculation again emerging that Trump may “wag the dog” and launch an attack on the Kim regime to deflect from the domestic media onslaught a la Syria, especially after last night’s report that the US has deployed a third carrier group to the Western Pacific, on Sunday Korea’s state news agency, KCNA reported that after weeks of defiant ballistic missile tests Kim Jong Un supervised the test of a new anti-aircraft weapon system and ordered its mass production and deployment throughout the country.

While KCNA did not report the exact nature of the weapon or the time of the test it said it was organized by the Academy of National Defence Science, a blacklisted agency that is believed to be developing missiles and nuclear weapons.

Meanwhile, Kim – taking a page out of his father’s playbook – watched…

… delighted.

According to KCNA, “Kim Jong Un … watched the test of a new type of anti-aircraft guided weapon system organized by the Academy of National Defense Science.”

“This weapon system, whose operation capability has been thoroughly verified, should be mass-produced to deploy all over the country … so as to completely spoil the enemy’s wild dream to command the air, boasting of air supremacy and weapon almighty,” the press agency said.

As Reuters adds, the North has been pushing to develop a wide range of weapon systems since early last year at an unprecedented pace including a long-range missile capable of striking the mainland United States and has in recent weeks tested its intermediate-range ballistic missile, making some technical advances. The isolated state rejects U.N. and unilateral sanctions by other states against its weapons program as an infringement of its right to self defense and says the program is “necessary to counter U.S. aggression.”

We doubt it will succeed, especially with the US piling up aircraft in North Korea’s vicinity.

And while the military posturing is set to continue on both sides until some real conflict finally emerges, a potentially more relevant story is that despite assurances by Beijing that it is isolating Pyongyang, on Friday Yonhap reported that North Korea’s grain imports from China showed a more than fivefold surge last month from a year ago.

 

The North brought in 4,100 tons of grain from China in April, 5.4 times higher than 754 tons a year earlier, according to Kwon Tae-jin, head of South Korean agricultural think tank GS&J Institute’s North Korea and East Asia division. The North’s combined grain imports from China during the January-April period also marked a spike of 4.3 times to 10,619 tons from a year ago, with wheat flour at the top with 3,403 tons, the broadcaster said.

This has prompted the question whether China is promising Trump, and its Asian neighbors, one thing namely that it will pressure North Korea into halting its nuclear tests by limiting commerce with Kim, while in reality it is not only maintaining but expanding trade relations with its feisty neighbor.

It’s becoming a weekend tradition.

Almost exactly one week after the latest ballistic missile test launch by Pyongyang last Sunday, and two weeks after a similar launch the weekend prior, North Korea has fired its latest unidentified ballistic missile early on Monday, South Korea’s military said according to Yonhap News. According to NBC, the North Korean missile flew for 6 miles after launch and landed in the Sea of Japan.

The launch will be the 12th missile Pyongyang has fired this year (according to the WSJ, and 9th according to Bloomberg, which count launch “errors” differently).

North Korea test-fired a new mid-to-long-range rocket, which it calls the
Hwasong-12, on May 14, 2017

The unidentified missile was fired from near the North Korean coastal city of Wonsan, Seoul’s Joint Chief of Staff (JCS) said. The missile flew in a easterly direction, sources said.

The launch was immediately reported to President Moon Jae-in, who called a meeting of the National Security Council at 7:30 a.m. (2230 GMT Sunday), the South Korean office of the Joint Chiefs of Staff said in a statement, according to Reuters.

While there was little initial information, the North Korean projectile may fall into waters of Japan’s exclusive economic zone, or EEZ, according to Japan’s public broadcaster NHK which cited the Japanese government.

NHK also adds that the Defense Ministry is analyzing details such as projectile path, and added that the foreign ministry will – again – protest to North Korea using diplomatic channels.  Prime Minister’s office collecting information in task office from related agencies and heighten alert.

There has been no official response from the White House yet, altough we expect the token “the White House is aware of the launch” will be fortcoming momentarily.

Trump, who has said all options are on the table to deal with Kim’s regime, has repeatedly sought more help from China to rein in its neighbor and ally. Acting Assistant Secretary of State Susan Thornton on Friday acknowledged China’s efforts such as banning North Korean coal imports and tightening border controls, while adding that “they clearly have to do more.” Clearly, because on Friday Yonhap reported that North Korea’s grain imports from China showed a more than fivefold surge last month from a year ago.

At least North Korea has so far this year refrained from conducting a nuclear test, something which even Beijing has said would be a ‘red line.”

Meanwhile, as reported yesterday, a third US aircraft carrier, the USS Nimitz is now making its way to the Korean Peninsula where it will join the Carl Vinson and Ronald Reagan, ahead of what many anticipate could be a “decapitation” attack on the North Korean regime.