Political uncertainty and risk aversion kicked into high gear during the latest New York session, weighing on higher-yielding currencies and U.S. equity indices.
- Canadian manufacturing sales down 1.8% vs. projected 1.0% drop
- U.S. initial jobless claims at 232K vs. 240K forecast, 244K previous
- Philly Fed index down from 19.5 to 18.9 vs. 18.3 consensus
- U.S. capacity utilization rate at 76.7% in July as expected
- U.S. industrial production at 0.2% vs. 0.3% consensus, 0.4% previous
- U.S. CB leading index posted 0.3% gain as expected
- Police report at least 13 casualties in Barcelona terror attack
- White House Economic Adviser Cohn rumored to resign
U.S. equities drop on rumored resignations
Following the joint resignation of the members of Trump’s Manufacturing Council and Strategy & Policy Forum (or according to his tweet, his decision to end both), market watchers had been buzzing about potential resignations by top officials in Washington as many are displeased with how the President responded to the events in Charlottesville.
Perhaps the biggest rumor that rattled Wall Street was White House Economic Adviser Gary Cohn’s possible departure since this would significantly derail the administration’s fiscal policy reform plans (read: tax cuts). Members of the GOP have also been distancing themselves from the Donald, sending a fresh batch of political uncertainties in the mix.
It didn’t help riskier assets that the attack in Barcelona has been confirmed by the policy as terror-driven.
- Dow 30 index is down 274.14 points to 21,750.73 (-1.24%)
- S&P 500 index is down 38.10 points to 2,430.01 (-1.54%)
- Nasdaq is down 123.19 points to 6,221.91 (-1.94%)
U.S. data turns out mixed
Uncle Sam’s reports were a mix of green and red, also keeping some doubts on the Fed’s ability to hike rates next month in place.
First, the good ones. Initial jobless claims came in 232K versus the projected 240K reading and the earlier 244K figure, reflecting positive hiring momentum. The Philly Fed index dipped from 19.5 to 18.9 to signal a slower pace of industry growth but this was better than the projected fall to 18.5. Underlying data reflected gains in new orders, shipments, and employment while the index for general activity dipped.On a less upbeat note, the industrial production report showed a meager 0.2% uptick versus the projected 0.3% increase and the earlier 0.4% gain. Capacity utilization was unchanged at 76.7% as expected. Also, the CB leading index posted a 0.3% uptick as expected, half of the earlier 0.6% increase.
These not-so-upbeat figures were highlighted in FOMC member Kaplan’s speech as he pointed out that the central bank should be more patient before deciding to hike again. He said that he’s still seeing some slack in the labor market and that a weaker dollar would be helpful in terms of stoking inflation.
Major Market Mover(s):
JPY & CHF
The yen was in the best position to take advantage of risk-off vibes coming from the Barcelona attack and the fallout in the U.S. government.
AUD/JPY is down from 87.33 to 86.38 (-1.08%), CAD/JPY tumbled from a high of 87.40 to 86.37 (-1.04%), NZD/JPY slipped to 79.80 (-0.96%), and USD/JPY fell to 109.46 (-0.65%).
The franc was also able to grab its share of gains from risk aversion, particularly against the higher-yielding commodity currencies.
AUD/CHF is down to .7593 (-0.74%), NZD/CHF slipped from .7078 to .7015 (-0.67%), CAD/CHF dropped from .7653 to the .7600 handle (-0.72%), and USD/CHF is down to .9623 (-0.35%).