Market Worries about Trump
December 17, 2018
The DOW has fallen more than 1.0% to start the new week and to below 24,850, territory not seen since last March. President Trump is the common element in a slew of developments worrying investors.
- The threat of a presidential veto against any budget bill that doesn’t fund a border wall may shut down the federal government at the end of this week.
- Trade tensions between the United States and the rest of the world aren’t getting resolved, and global data already reveals a broad loss of growth momentum.
- Market-based betting now perceives more than an even chance Trump will be impeached in his first term. During the Watergate crisis, the DOW experienced a bear market with over a 40% drop.
- Just days before an FOMC meeting, Trump has against tweeted critical remarks about Federal Reserve policy, asserting that an interest rate hike would be ill-advised because of a strong dollar and low inflation.
The dollar ironically has fallen today, losing 0.7% against the peso, 0.6% relative to the Swiss franc, 0.4% vis-a-vis the euro and yen, 0.3% versus sterling, 0.2% relative to the yuan and 0.1% against the Australian and New Zealand dollars.
Equity trading overnight began on a upbeat note, with gains of 1.2% in Singapore, 1.0% in Australia, 0.9% in India, and 0.6% in Japan, but the mood soured in Europe where stock markets have dropped by 1.2% in Switzerland, 1.1% in Germany, 0.9% in France and Italy, and 0.8% in Great Britain.
The ten-year Treasury yield dipped another two basis points to 2.87%. That’s 37 basis points below the close on November 7.
The price of gold and oil rose today by 0.4% and 0.1%.
New Zealand’s Performance of Services index fell 2.1 index points to a 3-month low in November.
CPI inflation in the euro area dropped 0.3 percentage points to 1.9% in November. Core inflation slid 0.1 percentage point to 1.0%, and the 12-month rise of the energy component settled back to 9.1% from 10.7% in the prior month.
Euroland’s seasonally adjusted trade surplus narrowed to EUR 12.5 billion in October from EUR 13.0 billion in September and EUR 16.1 billion in August. The unadjusted January-November surplus of EUR 156 billion was EUR 31 billion smaller that the surplus in the first 11 months of 2017.
Manufacturing activity in the New York area weakened to a 19-month low according to the December Empire State manufacturing index, whose reading of 10.9 was down from 23.3 in November.
Italy’s January-October trade deficit of EUR 32.27 billion reflects a nearly 15% contraction from a year earlier. In contrast, Norway’s trade surplus during the same period was 71% wider than a year earlier.
Turkish unemployment rose 0.3 percentage points to 11.4% in September, marking its fifth consecutive monthly increase. And on top of a 2.6% drop in September, Turkish industrial production fell by a further 1.9% on month in November to show a 12-month decrease of 5.7%.
Several economies reported price data. Austrian CPI inflation was 2.2% in November for the third time in four months. Czech PPI held steady at 3.9% in November but had been as low as zero percent last April. Cypriot CPI inflation slowed 0.3 percentage points to 1.6% last month, and Danish PPI inflation dropped by a full percentage point to 5.1%. Polish core CPI inflation slipped to 0.7% from 0.9%.
Property prices in China rose 0.9% in November and posted their biggest 12-month increase (9.3%) in 16 months.
South Africa is observing its Day of Reconciliation holiday today.
Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: border wall dispute, Euroland CPI, Trump and the Federal Reserve
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