October 16, 2017
Captains of global finance survey economic landscape, euro-area political season in full swing, and oil struggle takes hold in Iraq. Here are some of the things people in markets are talking about today.
Finance and monetary chiefs around the world took stock of the global economy over the weekend as the ‘Goldilocks’ rally — synchronized expansion with limited inflation — spurs fresh market records. Federal Reserve Chair Janet Yellen reiterated the case for gradual interest-rate increases, after Friday’s weak inflation data added to the growing weight of evidence that structural headwinds are limiting price pressures. “My best guess is that these soft readings will not persist,” she said in a speech at the G-30 gathering in Washington. Japanese and euro-area officials downplayed risks from soaring asset prices, and clarified the outlook for stimulus policies next year. European finance chiefs, meanwhile, were surprisingly bearish, with Barclays Plc Chief Executive Officer Jes Staley saying market conditions feel as benign as in 2006.
Catalonia’s President Carles Puigdemont insisted the illegal referendum on Oct. 1 gives his government a mandate to found a new republic, and called for a face-to-face meeting with the Spanish prime minister. The robust defense of the region’s claim for independence may spur Madrid to press ahead with the process of suspending self-rule within days.In Austria, the general election heralded a big shift to the right that may make the country a more challenging ally for its European partners. The nationalist People’s Party has a mandate to form a coalition to replace the Social Democrats, with the controversial Freedom Party a prospective junior partner. Meanwhile, Germany’s Christian Democratic Union posted its worst election result in Lower Saxony since 1959, weakening German Chancellor Angela Merkel’s bargaining position as she enters talks this week to form a national government.
For equities, it’s green across the board. Stock benchmarks from Tokyo, Sydney to the euro-area rose, with basic-resources shares hitting a four-year high. Yellen’s hawkish pronouncements over the weekend are breathing life into long-dollar trades and sending Treasury yields higher, ahead of September housing data.
Brexit is hard
U.K. Prime Minister Theresa May will visit Brussels today in a bid to unlock Brexit talks, ahead of a crunch summit with European Union officials later this week. It comes amid a cross-party effort by British lawmakers to stop the government from pushing through a no-deal divorce, which would trigger a renewed slide in the pound to $1.10, according to Mizuho Bank Ltd.
Iraqi forces moved to wrest control of oil fields near the northern city of Kirkuk from Kurdish fighters, capturing, they say, a refinery and other facilities in the petroleum-rich province. The Iraqi military has also taken over a nearby gas plant, according to state television, which has emerged as a flashpoint in the power struggle between federal authorities in Baghdad and the Kurdistan Regional Government after last month’s referendum on independence. While crude exports from the disputed area were flowing normally on Monday, Brent crude rose as much as 1.7 percent to $58.13 a barrel, as markets braced for supply disruptions.