August 11, 2017
Trump ups the rhetoric, markets sell off some more, and U.S. inflation data due. Here are some of the things people in markets are talking about today.
President Donald Trump said yesterday that his “fire and fury” comments may not have been tough enough, and refused to rule out a preemptive strike against North Korea when he talked to reporters yesterday. The war of words between Washington and Pyongyang has spurred a sharp response from regional actors, with Australia backing the U.S. position, while the Communist Party-linked Global Times in China said that country should prevent Trump and his allies from overthrowing Kim Jong Un. The latest round of United Nations sanctions, meanwhile, are targeting a much wider range of entities linked to the North Korean leadership.
Overnight, the MSCI Asia Pacific Index excluding Japan lost 1.6 percent as tensions rose. Japanese markets were closed for a holiday. In Europe, the Stoxx 600 Index was down 1.1 percent at 5:15 a.m. Eastern Time as the region’s equities headed for their worst week in nine months. S&P 500 futures slipped 0.3 percent, after dropping the most since May yesterday, while the yield on 10-year Treasuries dropped below 2.2 percent. Gold continued to rise.
Analysts surveyed by Bloomberg say core inflation probably rose 0.2 percent in July. Should they be proven correct when the figures are published at 8:30 a.m. this morning, it would end a four-month string of below-forecast readings. Yesterday, Federal Reserve Bank of New York President William Dudley cautioned that “it’s going to take some time” for headline inflation to return to the central bank’s 2 percent target. The lack of pickup in inflation, despite low unemployment, remains a mystery.
A barrel of West Texas Intermediate for September delivery was trading at $48.13 at 5:40 a.m., dropping more than 2 percent from yesterday’s high over $50. The move came after the International Energy Agency cut estimates for the amount of oil needed from OPEC this year and next, after lowering consumption forecasts for China and India. This flies in the face of OPEC’s own forecast, released yesterday, which showed expectations for increased demand for its crude. Non-OPEC production will get a health check later today when the Baker Hughes U.S. rig count is published at 1:00 p.m.
Bank of Minneapolis President Neel Kashkari and Federal Reserve Bank of Dallas President Robert Kaplan, both voting members of the Federal Open Market Committee, are due to speak later. Kaplan, due at 9:40 a.m. and Kashkari, at 11:30 a.m., are in favor of waiting for inflation to hit the Federal Reserve’s target before hiking rates.