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Investors Nervously Await More Info on Mueller Indictments

Investors Nervously Await More Info on Mueller Indictments
(Mandel Ngan/Getty Images)

By    |   Monday, 30 October 2017 08:07 AM

The excitement today focuses on U.S. data with the release of the personal consumer expenditure figures, which, yes, are important for investors.

Frankly it does not get more exciting than this.

Over the past 20 years, the personal consumer expenditure deflatorwhich is one of the Fed’s favorite inflation indicators, has averaged 1.80 percent year-over-year. The consensus expectation is for today’s inflation number to be at 1.60 percent year-over-year.

In “economic terms” that is indistinguishable. Economists do not add that much fate in the accuracy of data and to be within a quarter of 1 percent of the 20-year average is essentially to hit the 20-year average.

Of course, there is a risk of some disaster-induced-distortions around the numbers. However, such distortions are more likely to show up in the personal income and the personal spending numbers than in the prices’ numbers, perhaps.

Income will be affected as lower income jobs, which pay on attendance and are more likely to be affected by the hurricanes and wildfires.

Consumption data is affected by the impracticality of shopping in the midst of a disaster and by disrupted supply chains, although online sales will perhaps be less affected.

Today we get also the Dallas Fed Manufacturing Survey (opinion poll) of business sentimentbut this is an irrelevance that doesn’t need to concern the investor.

The Euro area is offering Germany’s inflation figure that in September came in at 1.80 percent, unchanged from August.

We’ll get also get consumer prices in Spain, which are expected to rise 1.6 percent year-on-year in October of 2017, easing from a 1.8 percent gain in September and missing market expectations of 1.7 percent.

Both sets of consumer price inflation figures should be close to the ECB’s inflation target, which is of course near but not at, but below, but not too far below, but sort of about 2 percent, but lower.

Germany and Spain are seen producing a year-on-year rate of 1.70 percent for the headline consumer price number.

There is also the Euro area opinion poll of business and consumer sentiment, for which the Flash Consumer Confidence Indicator for EU and euro area for October and that were released on October 23 remained broadly flat in the euro area (+0.2 points to -1.0) and unchanged in the EU (at -1.6) compared to September. The final numbers will be released today, but these numbers are rather irrelevant for provoking investors’ concerns.

A legitimate question today is also if Spanish data could be affected by events in Catalonia?

It seems relatively unlikely, at least for now, despite Friday’s declaration of independence and also on Friday, Madrid stripped Catalonia of its autonomy and removed Catalan leader Carles Puigdemont from office.

The weekend’s pro-unity demonstrations in Barcelona, at the margin may have disrupted somewhat consumer spending, but not in a very significant manner.

The United States has politics too.

One is focused on the Russia inquiry: Donald Trump sent a barrage of angry tweets as charges were reported.

Details of the first wave of charges are expected today after the team led by special counsel Robert Mueller filed its first charges under seal on Friday.

Markets are likely to get agitated only if those close to President Trump are being charged with criminal offense.

And the other one is about the House Republicans who will toss a giant tax bill into the capital’s autumnal winds on Wednesday. How it will emerge is hard to predict. Republicans hope there’s a sweet spot that satisfies the party’s low-rate faction, provides a middle-class tax cut and avoids stirring up too much business resistance. They’ll argue everyone will benefit from faster growth and a simpler tax code. We’ll wait and see what comes out.

The UK offers lending mortgage data todaywhich may be of slight interest.

The faith of the UK housing market is something that gets international investors agitated. However, the sort of properties that is bought by foreign investors tend to differ from the sort of properties bought by domestic residents, so this is not necessarily a great deal of read through from mortgage numbers to the foreign owned property sector.

The data perhaps will say more about the state of the UK economy, the balance of migration and so forth than anything else.

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

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Markets are likely to get agitated only if those close to President Trump are being charged with criminal offense.
trump, investors, russia, charged
Monday, 30 October 2017 08:07 AM
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