Tags: aggressive | immigration | policy | markets | trump

More Aggressive Immigration Policy Will Sway Markets

More Aggressive Immigration Policy Will Sway Markets
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Monday, 08 April 2019 10:16 AM Current | Bio | Archive

On the ongoing U.S.-China trade negotiations, the only thing that can be said is that beyond the pledge to keep talking, there has no timeline for a definitive trade deal and a summit between President Donald Trump and Chinese President Xi Jinping been established yet.

Besides that, the resignation on Sunday of Kirstjen Nielsen, the U.S. secretary of Homeland Security might not seem to be a direct issue for financial markets, given the abnormally high turnover, investors have become used to departures by members of the U.S. administration.

However, investors could do well taking note as this one may be slightly different.

If the change signals a move towards a more aggressive immigration policy, that may have short-term and long-term economic concerns.

Short-term, because a more hostile tone towards Mexico specifically, may raise concerns in financial markets about the stability about NAFTA or the alternative signed but not ratified United States–Mexico–Canada free trade Agreement (USMCA) that has been the result of a 2017–2018 renegotiation of NAFTA by its three member states.

Uncertainty about the direction of North American free trade may continue to delay investment decisions by companies that have come to depend upon complex supply chains, and that has implications for and beyond the United States.

Longer-term, the concern is that prejudice against immigration or indeed any other sort of prejudice, will undermine economic growth trends.

A harsher anti-immigration policy may allow such prejudice to develop.

The dollar index DXY quotes at 97.1820, slightly lower than at Friday’s close.

Gold (Comex futures) is at about $1,302 per ounce, up $6.60 or 0.50 percent from Friday’s close.

Global oil prices have come into focus with the recent escalation of military tensions in Libya.

Although, Libya is not a major supplier, the news of military activity has raised concerns of sufficient scale to interest traders.

Over the longer-term, oil prices are likely to be kept.

For now, we have West Texas Intermediate (WTI) at about $63.33 per barrel, up from $46.54 on January 2 this year, and Brent crude oil at about $70.59 per barrel, up from $54.91/barrel on January 2.

That said and while supply constraints ease, we still can say that oil markets remain fairly supported.

Economically, the price of oil has not moved in a way that is likely to have significant impact at this stage. Corporate pricing power globally does seem to be quite subdued at the moment and this is unlikely to result in an accelerated increase in inflation.

U.S. consumers are benefitting from tighter labor markets, which means that there is “real” income growth in spite of the oil move.

In the meantime, from Germany we got today the merchandise trade data that show Germany exported goods to the value of 108.8 billion euros (USD $ 122 billion) and imported goods to the value of 90.9 billion euros (USD $102.2 billion) in February. German exports increased by 3.9 percent and imports by 5.1 percent in February year-on-year. After calendar and seasonal adjustment, exports were down 1.3 percent and imports 1.6 percent compared with January.

German exports are skewed towards companies’ capital spending. So, any sign of stabilization here have global implications. The industrial production data from Germany keeps being revised higher and that may suggest that the state of global demand is not as bad as financial markets sometimes think.

It certainly helps to explain why the “minutes” of the ECB monetary policy meeting on March 6-7 that were released last week on April 4, the European Central Bank (ECB) is more “willing” to raise rates than financial markets seem to believe, which of course is important for investors.

Finally, in the interminably tedious EU-UK divorce process, the UK has asked for an extension to the exit date and promised to send UK voters to the European Parliament elections on May 23-26.

Actually, UK voters have never really bothered with the EU Parliamentary elections in the past, so there may be not much of an issue here.

The French seem more concerned that the UK might participate in other aspects of the European Union in the event of a “long” delay of the UK exit. Perhaps on voting who may be the next President of the European Commission for instance.

Financial markets will continue to ignore all this, although there may be some volatility on Wednesday, when the EU summit takes place and where Flextension, extension or no deal Brexit will be decided on, according to reports.

The British pound quotes at about USD $1.30, practically unchanged from Friday’s close.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.
 

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If the change signals a move towards a more aggressive immigration policy, that may have short-term and long-term economic concerns.
aggressive, immigration, policy, markets, trump
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2019-16-08
Monday, 08 April 2019 10:16 AM
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