World Week Ahead: Eyes on White House, Yellen

Monday 21st August 2017

As central bankers from around the world including Federal Reserve chair Janet Yellen set to gather for their annual meeting in Jackson Hole, Wyoming, investors are closely watching the intensifying turmoil in the White House.

Steve Bannon, who was ousted from his role as US President Donald Trump’s chief strategist on Friday, returned immediately to his role as chairman to Breitbart News, telling Bloomberg that he was “going to war for Trump against his opponents — on Capitol Hill, in the media, and in corporate America.”

Wall Street ended lower on Friday. The Dow Jones Industrial Average fell 0.4 percent, while the Standard & Poor’s 500 Index eased 0.2 percent, and the Nasdaq Composite Index slipped 0.1 percent.

Former Vice President Al Gore called for Trump to resign at the end of a week during which Trump drew widespread criticism about his comments following a white supremacist terror attack in Charlottesville, Virginia.

“The terror attacks in the US and Spain just add to all the other geopolitical mess,” Simon Quijano-Evans, a strategist at London-based Legal & General Investment Management, said in a note to clients, Bloomberg reported. “At some stage that is likely to culminate into a more extreme market reaction.”

Not everyone agrees.

“The S&P 500 was showing signs of stabilising on Friday, following its 1.5 percent tumble on Thursday,” John Higgins, chief markets economist at Capital Economics, said in a note. “Unlike the bears, we doubt that that this is a lull in a storm … We still think that a major correction is unlikely before 2019.”

Also on Friday, billionaire investor Carl Icahn resigned his role as special adviser to Trump.

"I chose to end this arrangement (with your blessing) because I did not want partisan bickering about my role to in any way cloud your administration," Icahn wrote in a letter to Trump published on his website.

Earlier in the week, Trump opted to disband two business councils after numerous chief executives resigned or flagged they were about too. Trump also opted not to move forward with a third council to advise on infrastructure spending.

For the week, the Dow retreated 0.8 percent, while the S&P 500 gave up 0.7 percent, and the Nasdaq slid 0.6 percent.

While Wall Street’s fear gauge — the CBOE Volatility Index or the VIX — fell 8.3 percent to 14.26 on Friday, it remains elevated from recent lows.

Both Yellen and European Central Bank president Mario Draghi are set to speak on Friday in Jackson Hole.

Draghi will not deliver a new policy message at the conference, Reuters reported, citing two sources familiar with the situation, tempering expectations for the bank to start charting the course out of stimulus.

“Most global central banks are going into this thinking about tightening,” Gennadiy Goldberg, an interest-rate strategist at TD Securities in New York, told Bloomberg before Yellen’s appearance was announced. “That’s a big sea change.”

First, the Fed’s Robert Kaplan will speak on Wednesday.

The latest US economic data will show up in the form of reports on the Chicago Fed national activity index, due today; FHFA house price index, and the Richmond Fed manufacturing index, due Tuesday; new home sales, due Wednesday; weekly jobless claims, PMI Composite, existing home sales, and the Kansas City Fed manufacturing index, due Thursday; and durable goods orders, due Friday.

In Europe, the Stoxx 600 dropped 0.7 percent last Friday. That lowered its advance for the week to 0.6 percent.

(BusinessDesk)

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