Market Overview

Trump's Legal Woes Are The Center Of Attention: 5 Things The Globals Markets Are Talking About Today


To date, capital markets have had to contend with three trading themes: the impact of U.S. tax cuts, a global trade war and plummeting emerging markets. Now, investors also have to deal with Trump's future legal woes.

The market's focus is also on the Fed minutes to be released Wednesday. It's unlikely that the minutes will provide any new clues on how U.S. interest rate policy is going to develop further. The Fed's implied rate path — two further rate rises in 2018 and probably two more in 2019 — is mostly priced in.  Investors are also watching for any news from the Fed's Jackson Hole symposium.

With this in mind, here are five things the global markets were talking about on Wednesday.

1. Stocks Mixed Overseas

In Japan, the Nikkei closed higher overnight supported by tech shares, which tracked gains in their U.S colleagues. The Nikkei share average gained 0.64 percent, while the broader Topix advanced 0.77 percent.

Australian shares ended lower overnight, weighed down by materials and financials, as investors were wary of Prime Minister Turnbull's precarious grip on power. He has rejected resignations from seven cabinet members in a bid to head off a renewed leadership challenge. The PM was also forced to drop plans to cut corporate taxes after parliament rejected the proposal. The ASX 200 finished down 0.3 percent. In South Korea, the stock benchmark notched its first four-day winning streak since early June as it rode a rebound in the chip sector. The Kospi nudged up 0.1 percent.

In Hong Kong stocks closed higher for a fourth consecutive session overnight, despite investors waiting for the latest round of Sino-U.S. trade talks. At close of trade, the Hang Seng index was up 0.65 percent, while the Hang Seng China Enterprises index rose 1.1 percent.

In China, stocks fell overnight, weighed down by persistent economic concerns and worries over the outlook for trade ahead of lower-level talks in Washington today. The blue-chip CSI300 index fell 0.6 percent, while the Shanghai Composite Index ended down 0.7 percent.

In Europe, regional bourses trade mostly mixed — the DAX and CAC are trending higher after initial weaker open tracking lower U.S futures.

2. Oil Higher As Crude Stocks Drop, Iran Sanctions Weigh

Oil prices are a tad higher overnight on a drop in U.S crude inventories and a weaker dollar, while concerns about a potential shortfall in future Iranian supply due to U.S sanctions is also providing underlying support.

Brent crude oil futures are at $72.90 per barrel, up 0.37 percent from Tuesday's close. U.S. West Texas Intermediate (WTI) crude futures are up 0.41 percent, at $66.11 per barrel.

API data yesterday showed that U.S crude inventories fell by 5.2 million barrels in the week to August 17 to 405.6 million barrels. The market was looking for a fall of 1.5 million barrels.

Ahead of the U.S. open, gold prices have eased a tad after touching a one-week high overnight, as the dollar recovers some ground lost to U.S. President Trump's criticism of the Fed's interest rate hikes. Spot gold has retreated 0.2 percent to $1,192.93 an ounce, after earlier hitting $1,197.66. U.S. gold futures are largely unchanged at $1,200 an ounce.

3. Tsy-Bund Yield Gap Tightens

The Tsy-Bund spread is at 250 bps — the tightest in two months as the Eurozone economy and inflation shows signs of improvement and the market questions how long the U.S. economic strength will last.

Also pressuring U.S. yields was Tuesday's news that Paul Manafort, the former campaign chairman for President Trump, was convicted on eight counts of financial wrongdoing, has pushed U.S. 10-year yields lower.

German 10-year Bund is unchanged at 0.33 percent, after having moved away from last week's low of 0.287 percent.

Other Eurozone bond yields are mostly unchanged, except Italian bonds, which continue to find some demand after Moody's indicated on Monday that it was extending a ratings review for a downgrade.

4. Dollar Off Its Intraday Lows

The dollar is off its worst levels overnight after a multi-day sell-off from recent cycle highs, but appears to remain on the defensive in a quiet E.U. session as the market awaits for the release of Wednesday's U.S. Fed minutes for August and upcoming Sino-U.S. trade talks.

Trumps verbal intervention has weakened the U.S dollar. This week, he has complained about the job Fed Chair Powell was doing and believed that the Fed should be more accommodating to his policies. Given that the Fed is an independent institution, explicit comments about interest rates from a sitting President could just as easily have the opposite effect.

Trump wants lower rates and a weaker U.S. dollar. However, Powell may be more inclined to "normalize" rate policy to defend their credibility. Will risk aversion over Trumps potential and future legal problems provide a U.S. dollar bid?

EUR/USD and GBP/USD pairs trade within striking distance of their two-week highs at €1.1592 and £1.2922 respectively. Dealers took notice of recent Euro area wage data that has aided the ECB's case for policy exit down the road.

There seems to be some market confusion on a Nafta "handshake" deal – a bilateral agreement between the U.S and Mexico. The U.S announced that a deal was targeted for Thursday, however, Mexico has denied any such agreement.

5. New Zealand Retail Sales Climb

Data Tuesday night showed that retail sales in New Zealand gained a seasonally adjusted 1.1 percent in Q2, beating a market forecast for an increase of 0.3 percent.

According to the data, 11 of the 15 retail industries had higher sales volumes.

Hardware, building, and garden supplies had the largest increase, up 4.7 percent after a subdued 0.6 percent increase in Q1. NZD/USD rallied 1 percent to NZ$0.6703.

Related Links:

Mid-Morning Market Update: Markets Edge Lower; Target Beats Q2 Expectations

Despite Pre-Market Softness, S&P 500 On Track For Longest Bull Run On Record

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: News Eurozone Commodities Forex Treasuries Global Econ #s Markets


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