Reuters
“Wall Street drops on Trump’s threats of government shutdown, NAFTA end.”
U.S. stocks opened sharply lower on Wednesday, giving back some gains from a day earlier, after President Donald Trump warned of a government shutdown to build the Mexico border wall and also threatened to scrap a trade agreement with Mexico and Canada. The comments came as lawmakers face a late-September deadline to raise the U.S. debt ceiling or risk a default, and hours after a lawmaker said there was «zero chance» of the U.S. not raising the ceiling.
Investors have grown increasingly concerned about Trump’s ability to legislate his pro-growth agenda, especially those of tax cuts and infrastructure spending, given the near constant political rumblings in the White House. At 9:42 a.m. ET (1342 GMT), the Dow Jones Industrial Average DJI was down 77.83 points, or 0.36 percent, at 21,822.06 and the S&P 500. SPX was down 8.3 points, or 0.34 percent, at 2,444.21. The Nasdaq Composite was down 21.88 points, or 0.35 percent, at 6,275.60.
Investors are also jittery ahead of the annual gathering of global central bankers in Jackson Hole, Wyoming, where Federal Reserve Chair Janet Yellen’s Friday speech will be scrutinized for clues on the central bank’s stand on monetary policy.
Bloomberg
“French Manufacturing Propels Economic Growth as Services Slow.”
French manufacturing unexpectedly expanded at the fastest pace since 2011, underpinning a recovery in the euro area’s second-largest economy that was long in the making. A Purchasing Managers’ Index for the industry rose to 55.8 in August from 54.9 in July, according to IHS Markit. Economists surveyed by Bloomberg predicted the gauge would signal a slowdown in factory activity. A PMI for services fell to a seven-month low of 55.5.
The French economy is enjoying its strongest continuous expansion since 2011 — finally catching up with its European peers — after the election of Emmanuel Macron as president bolstered sentiment. The Labor Ministry is set to give unions a preview this week of its plans to overhaul the employment market. “The data are particularly promising for the manufacturing sector, with output and new order growth at multi-year highs,” said Alex Gill, an economist at IHS Markit. “With capacity pressures intensifying, signs are that unemployment will continue to decline in the third quarter.”
New York Times
“North Korea Hints It Is Developing More Advanced Ballistic Missiles”
North Korea’s state news media released a photograph Wednesday suggesting that the North was working on a more powerful solid-fuel ballistic missile, and said the country’s leader, Kim Jong-un, had ordered the production of more rocket engines and warheads.
Building a reliable re-entry vehicle, which allows a warhead to survive the intense heat and friction of re-entering the atmosphere, is one of the most difficult hurdles to clear in building an intercontinental ballistic missile, or ICBM. Mr. Kim said his country had proved its mastery through recent missile tests, including two ICBM launchings last month.
In its last test of its Hwasong-14 ICBM, on July 28, North Korea demonstrated that the missile could reach major cities in the middle of the continental United States, analysts said. But South Korean intelligence officials and other analysts still doubt that the North has mastered re-entry technology, though they said it was making faster progress than they had previously believed.
Since at least 2013, South Korea has been building a program known as Kill Chain that is aimed at detecting signs of imminent missile and nuclear attacks from the North with the help of American spy satellites, and, if necessary, neutralizing its weapons with pre-emptive strikes.
During a nationally televised news conference Thursday, President Moon Jae-in of South Korea indicated that the North had not built a reliable ICBM. “I think the red line is when the North completes an ICBM and weaponizes it by loading it with a nuclear warhead, and it is inching toward that critical red line,” Mr. Moon said, warning that additional missiles tests by the North would invite tougher and “unbearable” sanctions from the United States.
Bloomberg
“Brexit Gravity Pulls Down Pound”
The pound took another beating on the foreign-exchange market on Wednesday, dropping to its lowest level against the euro since 2009. Parity against the common currency beckons. The trigger for the latest leg lower was a purchasing managers’ index survey showing manufacturing in the euro zone beat expectations in August, expanding from the prior month rather than declining as economists had anticipated.
While the next PMI survey for the U.K. isn’t scheduled for release until Sept. 1, the Brexit-induced gap isn’t likely to close any time soon. Moreover, there’s a key difference between the pound’s current travails and what was happening on the market when it touched its record low against the euro at the end of 2008. This time, sterling is worth about $1.28 against the greenback, down from about $1.40 at the time of its nadir against the common currency.
There’s a distinct possibility that sterling’s weakness will surpass even the dark days of last year in the months after the U.K.’s shock decision to quit the European Union. While that in theory should help British exporters, the textbooks say it will also boost inflation — further crimping cash-strapped Brits at a time when wage growth is lackluster. For now at least, the pound remains trapped in a negative-feedback cycle.