August 23, 2017
Trump threatens a government shutdown, it’s PMI day, and Theresa May crosses a red line. Here are some of the things people in markets are talking about today.
Hitting a wall
President Donald Trump warned Democratic lawmakers that “one way or the other” the border wall with Mexico would be built, saying “If we have to close down our government, we’re building that wall.” In a sign that the market may be learning to discount Trump’s podium declarations, the dollar weakened slightly and Treasury yields remained broadly unchanged following the remarks.
A Purchasing Managers’ Index for manufacturing in the euro area rose to 57.4 in August, according to IHS Markit, with composite PMI inching higher to 55.8. Data for Germany pointed to the economy growing faster than 2 percent for the first time since 2011, while French manufacturing unexpectedly expanded in August. The euro currency reversed earlier losses after the numbers were released and was trading at $1.1783 by 5:30 a.m. Eastern Time.
In an effort to speed up negotiations on the terms of the country’s exit from the European Union, British Prime Minister Theresa May has conceded that EU laws will continue to influence the U.K. after Brexit. The weakening of what was once a “red line,” saw the pound drop to its lowest level against the dollar in two months and the lowest level against the euro since October’s sterling flash crash. An index of economic conditions in Britain has fallen to the lowest reading of the year as businesses are becoming increasingly worried about the economy.
Markets still in holiday mode
Overnight, the MSCI Asia Pacific Index advanced 0.1 percent while Japan’s Topix index gained 0.3 percent as Trump’s speech weighed on stocks in the region. In Europe, the Stoxx 600 Index was down 0.2 percent at 5:30 a.m., with S&P 500 futures also slipping 0.2 percent. A barrel of West Texas Intermediate for October delivery was 19 cents lower at $47.65 and gold was broadly unchanged.
U.S. mortgage applications are due at 7:00 a.m., with new home sales numbers scheduled for 10:00 a.m. At 9:45 a.m. Markit will publish U.S. manufacturing and service PMIs. At 1:05 p.m. Dallas Fed President Robert Kaplan speaks, in the second central bank address of the day following ECB President Mario Draghi’s speech earlier this morning. For central bank-watchers the big event of the week is Jackson Hole, where Draghi and Federal Reserve Chair Janet Yellen are both due to speak on Friday.