Global News August 24, 2018

  1. BBC
  2. Global News August 24, 2018

“Stocks Rise; Dollar Declines After Powell Comments: Markets Wrap.”

U.S. stocks rose, while the dollar and Treasuries fell after a speech by Federal Reserve Chairman Jerome Powell backed up the case for gradual rate increases.
The S&P 500 Index headed for its second weekly gain in a row, trading just under a record close last reached in January. The dollar extended losses and the 10-year Treasury yield pared gains after Powell said that gradual rate hikes are likely appropriate if growth stays strong. West Texas crude rose above $69 a barrel.
The Chinese yuan traded offshore gained the most in a week against the greenback after the People’s Bank of China said it tweaked how it fixes the level of its nation’s currency. The government also said Friday it was removing limits on foreign ownership of its banks. The changes come after low-level talks between the U.S. and China this week failed to make any progress in ending the trade war as both side slapped new tariffs on each other.
Investors hoping for a global-trade resolution were left disappointed after the U.S. talks with China ended with an increased likelihood that tit-for-tat tariffs will escalate, casting a shadow over the global-growth outlook. The focus now shifts back to Fed policy, with bond traders clinging to bets for two rate hikes by year-end as they brave turmoil in emerging markets, continuing trade tensions and a U.S. president who openly pushed policy ideas on the central bank.
“We’re hitting new highs. And when you hit new highs, that also makes people a little bit nervous, ‘Oh my god, should I buy?,”’ Joe “JJ” Kinahan, the chief market strategist at TD Ameritrade, said by phone. “Also you’ve got to remember, maybe not as much on the East Coast, but for most of the rest of the country, this is the first week of school, so people are in and out a little bit more too.”
Elsewhere, the euro gained after data confirmed solid growth in Germany, the region’s biggest economy. Italian bonds fell on concern the government will flout European Union spending rules as it pursues a populist agenda. Oil headed for the first weekly gain in two months amid prospects of tightening supplies from the North Sea to the Middle East. Most industrial metals rose along with gold and platinum.


“Fed Chair Powell: further rate hikes best way to protect recovery.”

The Federal Reserve’s steady interest rate hikes are the best way to protect the U.S. economic recovery and keep job growth as strong as possible and inflation under control, Fed Chair Jerome Powell said on Friday in a high-profile endorsement of the central bank’s current approach to policy.
Speaking just days after President Donald Trump criticized the U.S. central bank’s rate hikes, Powell used an annual research symposium here to “explain today why my colleagues and I believe that this gradual process…remains appropriate.”
“The economy is strong. Inflation is near our 2 percent objective, and most people who want a job are finding one… If the strong growth in income and jobs continues, further gradual increases in the target range for the federal funds rate will likely be appropriate.”
The Fed “has been navigating between the shoals of overheating and premature tightening with only a hazy view of what seem to be shifting navigational guides,” Powell said. With unemployment so low, “why isn’t the (Federal Open Market Committee) tightening monetary policy more sharply to head off overheating and inflation? With no clear sign of an inflation problem, why is the FOMC tightening policy at all, at the risk of choking off job growth and continued expansion?”
The resolution, he said, is to move carefully. “I see the current path of gradually raising interest rates as the FOMC’s approach to taking seriously both of these risks.” The Fed is expected to raise rates in September, perhaps again in December, and continue what it refers to as “normalization” into 2019.


BBC News
“Scott Morrison is new Australian PM as Malcolm Turnbull ousted.”

Scott Morrison has become Australia’s new prime minister after Malcolm Turnbull was forced out by party rivals in a bruising leadership contest.
Mr Turnbull had been under pressure from poor polling and what he described as an «insurgency» by conservative MPs. Mr Morrison, the treasurer, won an internal ballot 45-40 over former Home Affairs Minister Peter Dutton – who had been Mr Turnbull’s most vocal threat.
Mr Turnbull is the fourth Australian PM in a decade to be ousted by colleagues. «It has been such a privilege to be the leader of this great nation. I love Australia. I love Australians,» he said on Friday.
With an election looming, MPs were nervous about the government’s poor opinion polling and recent by-election defeats. Last week, a row over energy policy ignited long-existing tensions between Mr Turnbull, a moderate, and his party’s conservative wing.
Mr Dutton, a conservative, then unsuccessfully challenged Mr Turnbull on Tuesday, but his narrow defeat only stoked further discord. Mr Morrison entered the race after Mr Turnbull lost key backers. After a majority of MPs called for a leadership «spill», Mr Turnbull agreed to step down.
To further complicate matters, Mr Turnbull has signalled he would resign from parliament, which would force a by-election and potentially put the government’s one-seat majority at risk and force the new premier to call early elections. However, Mr Morrison, who was sworn in on Friday, told reporters there were no plans to do this any time soon. His government, he said, would be in place by next week.


“U.S. Imposes New Sanctions on Russia After Nerve Agent Poisoning.”

The U.S. announced details of new sanctions against Russia over the March poisoning in the U.K. of a former Russian agent and his daughter, the latest sign relations between the former Cold War foes continue to deteriorate.
The new restrictions released by the State Department target remaining sources of foreign assistance and arms sales to Russia as well as denying any U.S. credit to Russia including through the Export-Import Bank. The measures take effect upon publication in the Federal Register on Aug. 27. The sanctions come after the U.S. concluded that “the Russian Federation has used chemical weapons in violation of international law or lethal chemical weapons against its own nationals,” according to the State Department.
The move follows the State Department’s announcement on Aug. 8 that it would impose additional penalties on Moscow. The initial round of sanctions was expected on or around Aug. 22, with additional and more Draconian limits, including restrictions on trade and diplomatic ties, possibly coming about 90 days later. The ruble has dropped to two-year lows in recent weeks amid growing fears of new sanctions.
The new sanctions highlight how much worse U.S.-Russian ties have become even after Presidents Donald Trump and Vladimir Putin praised their joint meeting in Helsinki just over one month ago. Even before the latest announcement, there was growing bipartisan support in the Senate for separate pieces of legislation that would ramp up the pressure on Moscow as evidence emerges of continued Russian meddling ahead of the 2018 midterm elections. Among the most stringent measures being proposed in Congress are ones that would impose curbs on Russian sovereign debt sales and tougher limits on some of the country’s biggest banks as punishment for election meddling.