U.S. Supreme Court

President Donald Trump moved to reshape the U.S. Supreme Court, filling the second vacancy of his presidency with Judge Brett Kavanaugh and potentially creating the most conservative court in generations.

Kavanaugh, 53, is a Washington insider and former aide to President George W. Bush who has been a skeptic of regulatory power during a dozen years on a federal appeals court in Washington.

If confirmed by the Senate, the Supreme Court could shift to the right on gay rights, affirmative action, the death penalty, and gun restrictions and possibly put the landmark Roe v. Wade abortion-rights ruling at risk.

Kavanaugh said: “A judge must interpret statutes as written. And a judge must interpret the Constitution as written, informed by history and tradition and precedent.”

British Politics

The financial market reaction to the resignation of U.K. Brexit Minister David Davis was a collective “Who?”

But the financial markets did react to the resignation of U.K. Foreign Secretary Boris Johnson. International investors appeared to have heard of Johnson. Not perhaps because of the former foreign secretary’s diplomatic prowess, but maybe because Johnson appeared at times to emulate the slapstick comedy of Mr. Bean.

The British pound weakened a little on Johnson’s resignation announcement before stabilizing a little higher. The British pound is a useful gauge for investor opinion because the value of the British pound is determined by international investors and it is intimately bound up in perceptions of risk from the issue of the U.K. exiting the European Union (EU).

Ultimately, the departures of Davis and Johnson are unlikely to negatively affect market perceptions about the quality of the British government. The question is whether it weakens the position of Prime Minister Theresa May and whether that has a bearing on the “exit” negotiations with the EU.

So far, there is quite a lot of noise in the media. May's position within the governing conservative party does not appear to have been weakened.

The question is more the European Union’s reaction to these recent events. If the European Union were to push for further significant concessions around the “exit” of the U.K. from the EU, that could raise questions about the ability of Prime Minister May’s government to survive and thus potentially force a “hard” exit for the U.K. If the European Union takes the collective agreement with the British government for a relatively “soft” exit, Prime Minister May’s government is likely to survive.

Global Economies’ Data

Away from the noise of politics, there is a lot of data that are sort of interesting. The latest industrial and manufacturing production data from the U.S., Europe, and the world as a whole all show that the economies are humming along trend-like rates of growth.

IHS Markit US Sector PMI showed industrials activity expansion came in at the fastest rate since March 2015.

From the U.K., we got its monthly GDP data release, which is a “new” innovation on the part of the National Statistics, and that shows that U.K. growth rose to 0.3 percent in May, up from 0.2 percent in April as the economy strengthened.

China Inflation

Meanwhile, China has published its inflation number, which edged up to 1.9 percent year-on-year in June of 2018 from 1.8 percent in May and matching market consensus.

Consumer price inflation in China matters only to China. It has no bearing on the rest of the world. The data came in as expected. This data of course precedes the tax on Chinese consumption of US products.

Producer price inflation increased by 4.7 percent from a year earlier in June of 2018, after a 4.1 percent rise in May and above market expectations of 4.5 percent, which perhaps indicates a degree of pricing power on the part of Chinese companies.

However, the translation of Chinese producer price inflation to Chinese export prices and the translation of Chinese export prices to foreign inflation rates are both so limited that there is not a significant global read-through from these numbers.

What one might be able to say perhaps, is that Chinese companies are not behaving as if the domestic economy is “weakening” significantly.    

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