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Trump Teases Markets With Fed Pick

Trump Teases Markets With Fed Pick

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Tuesday, 24 October 2017 06:53 AM Current | Bio | Archive

President Donald Trump has continued teasing the markets with the possibility of announcing a new nominee for the Federal Reserve chairman really, really soon, which normally should be before November 3, when the president starts his visit to Asia.

Trump neglected to mention that the Fed chair is not appointed on a presidential whim. Never forget that the advice and consent of the Senate is required, and the Senate has not necessarily been as cooperative as Trump might have hoped.

Over in China, today marks the final day of the 19th National Congress of the Communist Party of China where far-reaching change in the makeup of the top leadership of the Communist Party of China was on the agenda because almost 75 percent of the Politburo Standing Committee (top decision-making body) had to retire or be replaced at this congress.

Much like a G-7 summit, the details have been worked out in advance.

Nonetheless, China watchers are getting excited about their 5 minutes of fame as news media look for people to opine on the structure of the future Chinese leadership.

The order in which people walk onto the stage is what fixates the media today.

China’s ruling Communist Party approved today, Tuesday, a revised charter of the new constitution that enshrines President Xi Jinping’s name under its guiding principles and listed Xi Jinping’s thought on socialism with the Chinese characteristics for “new era” alongside the theories of Mao Zedong and Deng Xiaoping, elevating him hereby to the status that eluded his two immediate predecessors.

It’s interesting to take note that the presidents Jiang Zemin and Hu Jintao secured their contributions to the revised document, but neither was featured by name.

Investors could do well taking note that the positioning of the party hierarchy may be seen as a signal of future policy direction in China, but, and this is important, it will be next month’s summit on economic policy that will likely produce the clearest signals of how China will restructure itself in the coming years.

Besides that, and with the political backdrop coming through, economic data today is something of a nonevent. This is because most of the data today is what we could easily qualify as fake economics, which is nevertheless a far more serious thing than the spurious accusations of fake news that abound these days.

Fake economics today comes in the form of assorted business sentiment opinion polls (PMIs). The correlation of this data with economic reality has been declining for quite some time, but the correlation has declined more markedly since the global financial crisis.

The fundamental problem is that people are less and less inclined to complete surveys. This is also a problem with proper economic data. Survey responses therefore have to be considered with caution.

In context of Thursday’s ECB policy decisions, today’s IHS Markit Flash Eurozone PMI Key findings are worth a look

Flash Eurozone PMI Composite Output came in at 55.9 (56.7 in September), Flash Eurozone Services PMI Activity Index at 54.9 (55.8 in September) and Flash Eurozone Manufacturing PMI Output Index at 58.7 (59.2 in September) are all at 2-month lows while Flash Eurozone Manufacturing PMI at 58.6 (58.1 in September) came in at a 80-month high.

So, the recent strong growth of the Euro area economy was maintained at the start of Q4, driven by another marked improvement in new orders. Rising workloads encouraged firms to take on extra staff at the sharpest pace in over a decade.

It will be interesting to see in how far these positive data will have an impact on Thursday’s October 26, ECB’s Governing Council monetary policy decisions that will come with the usual press conference.

The Catalonian situation provides more political noise as Madrid attempts to impose direct control. In the meantime, Catalan authorities have stated they will not follow orders from the Spanish government if Madrid moves to reassert control over the region.

Among the risks that represents the Catalan situation, bank deposit flight remains a realistic risk. There will also be some economic consequences.

Other than that, the economic disruption is confined, at least for now, to the consequences of the protests on the labor market, which are probably no worse than ordinary strike actions and some possible delays of relocation of investment from outside the region into Catalonia.

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

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Trump neglected to mention that the Fed chair is not appointed on a presidential whim. Never forget that the advice and consent of the Senate is required, and the Senate has not necessarily been as cooperative as Trump might have hoped.
trump, teases, markets, fed, pick
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2017-53-24
Tuesday, 24 October 2017 06:53 AM
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