Funda-FX wrap: N.Korea /US summit losing traction

The focus from a fundamental perspective of today's markets was firmly on trade tension relief. 

Analysts at ANZ explained that China was announcing a reduction in automotive tariffs and the US working towards a deal to overturn the ZTE ban and will significantly cut auto import tariffs from July, the Ministry of Finance announced:

"For car imports, the 25% tariff levied on 135 items and the 20% duty on four items will both be reduced to 15%. Import tariffs for 79 items of auto parts will be reduced to a standardised 6%, down 46% on average across these items. After the move, the average tariff rate on vehicles will stand at 13.8%, while auto parts will be 6%. 

China imports around USD80bn worth of vehicles and parts on an annual basis. Over the past 12 months to April, there have been 29.3 million vehicles sold. Separately, WSJ reported that the US and China will settle the ZTE ban. The details are still being ironed out, but they are expected to involve changes to management, board seats, and a significant fine. However, President Trump later told CNBC that there was no deal on ZTE yet and that the fine could be around USD1.3bn."

Trump was also hitting the wires and warned that the N.Korean meeting in June was losing traction when he said there is a "very substantial chance" a historic summit with North Korea's Kim Jong-un next month may not happen. This follows North Korea saying it may cancel the summit if the US insists on it giving up nuclear weapons unilaterally.

Elsewhere, Salvini does not wish the leader of the 5-star party to be prime minister and the attempt by a little-known professor to become Italy’s next prime minister has hit a hurdle, following allegations that he had inflated his academic credentials.

The WSJ reported that the anti-establishment 5-Star Movement on Tuesday defended Giuseppe Conte against speculation that he overstated affiliations with elite international universities, saying the insinuations indicated fears of the changes coming under a 5-Star government with the right-wing League. 

Key fundamental headlines, (source, LiveSquawk):

• Fed's Mester sees stronger, volatile us inflation ahead – MNI
• US President Trump reportedly targeting 10% cut in EU steel exports to US - DJ
• Italian league member: Salvini, Di Maio held `constructive' talks
• Italy president has not yet decided whether to give pm mandate to Conte - source close to the president
• UK foreign ministry Johnson denies Brexit has damaged UK economy
• Italy 5-star party’s Di Maio could be back in running for pm – Repubblica
• Repubblica reporting Italy 5-star party’s Di Maio could be back in running for PM
• U.S. Senate democratic leader Schumer says China's xi has taken U.S. "To the cleaners" on ZTE
• Schumer says opposed to any changes in u.S. Sanctions against ZTE
• Schumer says if reports on ZTE are true, updated sanctions would 'do nothing to protect American national or economic security
• Pence says U.S .Will not make concessions unless North Korea initiates verifiable, irreversible denuclearization