Trump’s comments roil capital markets, oil rises

NEW YORK, Aug 23:  

Stocks on Wall Street fell, the dollar sagged and rates on Treasury debt slipped on Wednesday after US President Donald Trump’s threat to shut down the government and nix a trade accord with Canada and Mexico, which raised investor angst.

European equities shrugged off a PMI survey that showed the Eurozone manufacturing businesses had their best month of growth in six and a half years in August.

The upbeat survey was the latest sign of economic recovery in the single currency bloc, which could encourage the European Central Bank to start scaling back its stimulus.

Dovish comments by ECB chief Mario Draghi had little market impact though investors kept a close eye on monetary policy a day before the start of a central bank symposium in Jackson Hole, Wyoming.

Trump’s comments at a rally in Phoenix on Tuesday came as lawmakers face a deadline in late September to raise the US debt ceiling or risk defaulting on debt payments. Credit ratings agency Fitch Ratings said a failure to raise the federal debt ceiling in a timely manner would prompt it to review the US sovereign rating “with potentially negative implications.”

“How much emphasis to put on Trump’s remarks is hard to say,” said John Canavan, market strategist at Stone & McCarthy Research Associates in New York.

“It’s largely dependent on Congress to keep the government open. You can’t entirely discount his comments, but based on the history of his off-the-cuff comments, you can’t take them as policy stance,” Canavan said.

MSCI’s gauge of stocks across the globe shed 0.10 per cent and the pan-European FTSEurofirst 300 index lost 0.56 per cent. Stocks closed higher in Asia.

On Wall Street, the Dow Jones Industrial Average fell 71.98 points, or 0.33 per cent, to 21,827.91. The S&P 500 lost 7.9 points, or 0.32 per cent, to 2,444.61 and the Nasdaq Composite dropped 21.47 points, or 0.34 per cent, to 6,276.01.

Oil prices rose after US crude inventories declined for the eighth straight week and US crude production increased only slightly.

Brent crude futures rose 36 cents to $52.23 a barrel, while US West Texas Intermediate crude futures were trading at $48.08, up 25 cents.

The dollar fell 0.45 per cent to 109.11 yen, with the dollar index slipping 0.34 per cent to 93.228.

The Euro was propped up by strong German and French PMI survey readings, though analysts warned its gains could be short-lived due to concerns about heavy one-sided bets. The currency rose 0.43 per cent to $1.1810 and hit a fresh 10-month peak against the British pound, above 92 pence.

Sterling fell below $1.28 for the first time since late June. Concerns about Britain’s economic prospects and the Brexit process encouraged investors to push the pound lower.

Benchmark 10-year Treasury notes were last up 9/32 in price to yield 2.1834 per cent.

“To the extent that equities are reacting to last night’s speech you can say that’s bleeding now into fixed-income,” said Jim Vogel, an Interest Rate Strategist at FTN Financial in Memphis.

(This article was published on August 24, 2017)

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