Trump-Putin Summit
Russian President Vladimir Putin is meeting President Donald Trump today.
Markets will only care about the summit if there is a sign that there will be a change in economic sanctions against Russia. The issue of Russian involvement in the U.S. presidential election is only of importance to investors if it threatens members of the U.S. administration. It is unlikely that President Putin will do anything to change perceptions of the U.S. investigation.
As he headed to Finland’s capital Helsinki for the much-anticipated summit with Putin, Trump said no matter what the outcome, the media will be negative about his meeting.
Trump and top aides looked to ratchet down expectations for the Putin sit-down, with the U.S. ambassador to Russia saying it wasn’t really a summit, just a meeting. Perhaps that’s a signal in the manner of Trump signaling the employment report in advance that markets should not expect too much.
The only other bearing that the summit has on markets is indirect. Trump has been having an impact on the international political order one tweet at the time.
“No matter how well I do at the Summit, if I was given the great city of Moscow as retribution for all of the sins and evils committed by Russia over the years, I would return to criticism that it wasn’t good enough,” Trump tweeted.
Trump: EU Is One of United States’ Biggest Foes
In an interview with CBS Evening News anchor Jeff Glor in Scotland, released on Sunday, President Trump was asked to identify his “biggest foe globally right now.”
“Well, I think we have a lot of foes. I think the European Union is a foe, what they do to us in trade. Now, you wouldn’t think of the European Union, but they’re a foe,” Trump said.
He also named Russia and China as foes but added “that doesn’t mean they are bad. It doesn’t mean anything. It means that they are competitive.”
Now, the European Union has not, to date, been accused of interfering in the U.S. democratic process.
20th EU-China Summit
Today in China, the European Union and China got their 20th Summit in China for talks. Premier Li and President Juncker jointly attended the EU-China Business Roundtable. With trade tensions rising, the idea of shifting international alliances make stand the perceptions about the risks of further trade conflict.
US Market Data
On data, Chinese GDP came out as expected as did assorted other data releases. The Chinese economy advanced 6.7 percent year-on-year in Q2 of 2018, easing from a 6.8 percent growth in Q1 and matching market consensus. It was the weakest pace of expansion since the third quarter of 2016 amid intensifying tariff battle with the US and efforts to deleverage debt and financial risks.
Markets are not going to be surprised that there were no surprises with these Chinese data.
U.S. retail sales are due later today. This is a nominal number, so these sales numbers will start to include the effects of the Trump taxes (tariffs) on goods sold in the United States.
Fed Monetary Policy Report
The Fed released on Friday its semi-annual Monetary Policy Report to Congress wherein the Federal Reserve Board confirms its intention to a gradual pace of interest-rate hikes. The Report also addressed topics ranging from monetary policy rules to labor force participation.
A key phrase of the report reads: “The Federal Open Market Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with a sustained expansion of economic activity, strong labor market conditions, and inflation near the committee’s symmetric 2 percent objective over the medium term.”
We also read: “Globally, potential downside risks to international financial markets and financial stability include political uncertainty, an intensification of trade tensions, and challenges posed by rising interest rates.”
Fed Chair Jerome Powell will present the report before Congress this week.
Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.
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