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Trump's Legal Battles Are Sideshow for Financial Markets

Trump's Legal Battles Are Sideshow for Financial Markets
Maren Winter | Dreamstime.com

Monday, 16 April 2018 09:57 AM Current | Bio | Archive

The U.S. Ambassador to the United Nations, Nikki Haley, has suggested that new economic sanctions will be applied by the United States against Russia over the Syrian situation with the sanctions being detailed soon.

On CBS’ ‘Face the Nation’ she said: “You will see that Russian sanctions will be coming down. Treasury Secretary Steven Mnuchin will be announcing those on Monday, if he hasn’t already, and they will go directly to any sort of companies that were dealing with equipment related to Assad and chemical weapons use.”

Markets do not, as a rule, react to issues like the air strikes on Syria as markets are not directly affected. Specific assets will react to economic sanctions as there is a direct impact.

So far, we see oil prices dropping as fears about the fallout from the Syria strikes ease.

President Trump declared “mission accomplished” over the weekend which might make the announcement of sanctions against Russia a little bit surprising if the mission really is accomplished, who do more?

The Trump Twitter feed was also rather active over the weekend with complaints about former FBI Director James Comey’s book.

The president has also asked a court to block the Justice Department from using documents seized from his personal lawyer Michael D. Cohen.

Investors could do well keeping in mind that all of this is essentially a sideshow for financial markets.

The president’s political capital is arguably undermined by this sort of activity.

However, there were few market expectations for policies lead by the White House this year, so, the president’s political capital is not necessarily that important.

If there is an impact on the midterm elections in November, that may have more market relevance.

Political issues are also emerging in Japan where Public support for Prime Minister Shinzo Abe’s Cabinet has dropped to 37.0 percent, which is the second lowest poll result since Abe commenced his second stint as Prime Minister in 2012 on fresh revelations that have deepened cronyism and cover-up suspicions related to him.

For financial markets, again, the question is whether this matters to economic policy. Abe has been in office a long time and has pursued a lot of the announced policy agenda.

There is not, perhaps, that much new in terms of policy that Abe is offering.

A change in leadership may matter if the next Prime Minister has a radically different agenda, but were Abbe to resign, that of itself would not necessarily change existing economic policy.

In the meantime, Abe heads to Mar-a-Lago for a meeting with Trump where he needs a policy win after staking out a hawkish position on North Korea, he was caught on the back foot when Trump announced he was open to a summit with leader Kim Jong Un.

Meanwhile, U.S. retail sales rebounded in March after three straight monthly declines as households boosted purchases of motor vehicles and other big-ticket items, suggesting consumer spending was heading into the second quarter with momentum, Reuters reported.

The Commerce Department said retail sales increased 0.6 percent last month after an unrevised 0.1 percent dip in February. January data was revised to show sales falling 0.2 percent instead of the previously reported 0.1 percent drop.

Headline data are subject to revisions and the true trend of economic activity is often found in the patterns of data that lie beneath the headlines.

Whatever the numbers, the fundamental position for the U.S. consumer is strong, employment is good, very few people are losing their jobs involuntarily, wage growth is also good, and the tax cuts are helping higher income Americans.

We also have the National Association of Home Builders (NAHB) Housing Market Index (HMI) that rates the relative level of current and future single-family home sales.

The April NAHB housing market index came in at 69 vs 70 expected. 

The index fell to 70 in March of 2018 from a downwardly revised 71 in February. The component gauging current home sales was flat at 77.

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

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Investors could do well keeping in mind that all of this is essentially a sideshow for financial markets.
trump, legal, battles, financial, markets, investors, syria
Monday, 16 April 2018 09:57 AM
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