Global Market Turmoil Fanned by Intensifying Concern over Clinton’s Health

September 12, 2016

West Texas Intermediate crude oil dived 2.1% and is trading back below $45 at $44.94 per barrel. Gold dipped 0.4% to $1,328.60 per ounce.

Japan’s Nikkei slumped 1.7%. Other stock markets around the Pacific Basin fell 3.8% in Hong Kong, 2.7% in New Zealand, 2.2% in Australia, 2.3% in South Korea, 1.9% in China, 1.7% in Indonesia, 1.5% in India and 1.2% in Taiwan. Equities in Europe have plunged 3.8% in Greece, 2.7% in Italy, 2.6% in Spain, 2.0% in France and Germany, 1.5% in the U.K. and 1.2% in Switzerland.

The yen and dollar climbed on a flight of capital to safety. The dollar fell 0.6% against the yen by rose 0.7% relative to the Canadian and Australian dollars, 0.6% versus the kiwi, and 0.1% vis-a-vis sterling and the euro. The Swiss franc is unchanged and the yuan ticked 0.1% higher.

Ten-year sovereign debt yields rose 3 basis points in Germany, 2 bps in the U.K. and a basis point in Japan.

With just two weeks remaining to the first U.S. presidential debate between Trump and Clinton, investors now learn that Clinton has been diagnosed with pneumonia, forcing her to cancel a trip to California. This plays into the perception of her untrustworthiness, having repeatedly claimed to be only suffering from allergies. On top of narrowing polls, the likelihood of Trump winning the election is much greater. Trump represents vast change ranging from the tilt of the Supreme Court to the future independence of the Federal Reserve, America’s coziness to Russia, support for NATO, relations with Japan and China, acceptance of immigrants, and willingness to use weapons of mass destruction. Markets generally do not like uncertainty, and a Trump presidency constitutes a dose of maximum uncertainty for the foreseeable future.

Even before the Clinton news, markets had been irritated by scattered opinions from a range of Fed officials regarding the advisability of raising interest rates later this month. Markets had priced in greater odds of a move in September and even the possibility of two moves before end-year. ¬†Minneapolis Fed President Kashkari is the latest to offer a view. He touted¬†immigration as a development that could lift U.S. potential growth, but that’s not how Trump sees America becoming great again.

Speaking of shocks, the British Chamber of Commerce revised down projected U.K. economic growth for 2016, 2017 and 2018, attributing the revisions to the impact of leaving the European Union.

Japanese core private domestic machinery orders rose 4.9% in July, beating expectations for a decline. Orders from the public sector shot up 22.0%, but export orders sank 11.7%.

Japanese domestic corporate goods prices fell 0.2% in July but posted a smaller 12-month decline of 3.6%. In the year to July, import prices dropped 9.9%, and export prices fell by 2.6%.

Japanese machine tool orders recorded an 8.4% on-year drop in August, compared to double-digit decreases in each of the previous seven months of 2016 including a slump of 19.7% in July.

Ireland’s construction purchasing managers index slipped 2.6 points to a reading of 58.4 in August, a 3-month low.

In the year to August, consumer prices increased 0.7% in Portugal and 0.2% in Denmark but slipped 0.2% in Romania.

Other Fed officials are slated to speak today including Lockhart and Brainard.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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