Hurricane Michael to hit Florida, Trump says Fed is moving too fast with rate hikes, and optimism grows over a Brexit deal. Here are some of the things people in markets are talking about today.
Hurricane Michael strengthened to a “dangerous” Category 4 storm ahead of making landfall later today near Panama City, Florida. The fast-moving weather system has already cut oil production by 40 percent and natural gas output by 28 percent in the Gulf of Mexico. Wall Street will be watching insurers and reinsurers, energy utilities in the area, and homebuilder stocks as the impact of Michael unfolds over the coming days. Unlike Hurricane Florence, which lingered in one region, this storm is expected to move quickly north through Georgia before settling off the coast of Massachusetts by the weekend.
“I don’t like it,” President Donald Trump said yesterday, referring to the pace of Federal Reserve rate hikes, adding “I like low interest rates.” The president backed up his position by saying that absent resurgent inflation, there’s no need to move too fast. For economists, and Fed Chair Powell, CPI is the fly in the ointment. While Powell is confident that there will be no rapid price increases as expectations remain anchored, some former colleagues at the central bank have raised questions about the wisdom of being guided by the inflation outlook.
Talks in Brussels between British and European Union officials are concentrating on a compromise Brexit deal that could see the U.K. remain, temporarily at least, in the EU’s customs regime. European Commission President Jean-Claude Juncker has expressed confidence the two sides can agree a framework for an exit deal, which could come as early as next Monday, according to diplomats. There was less good news on the trade front for Britain when the U.S. threatened to block the country from a 46-nation public procurement agreement, a move which would deny companies access to a near $2-trillion market place.
Overnight, the MSCI Asia Pacific Index was broadly unchanged while the Topix index closed 0.2 percent higher as investor focus turned to corporate earnings. In Europe, the Stoxx 600 was 0.4 percent lower at 5:50 a.m. Eastern Time as Italian political risk continues and traders pared exposure to cyclical equities. S&P 500 futures pointed to a slightly lower open, the 10-year Treasury yield was at 3.229 percent and gold was down.
There are growing signs that China’s yuan may weaken past 7 per dollar for the first time in a decade. A former central bank adviser wrote in a China Securities Journal that tolerance of yuan weakness is needed to reform the exchange-rate regime, a viewpoint that may presage a breach of the key psychological level. The options market is showing that investors are increasingly confident of further losses for the currency ahead of next week’s Treasury Department decision on whether to name China a currency manipulator.