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Daily Briefing: Trump meets EU and NATO, Britain searches for militant network
May 25, 2017 / 7:33 AM / in 6 months

Daily Briefing: Trump meets EU and NATO, Britain searches for militant network

LONDON (Reuters) - U.S. President Donald Trump is no fan of transnational groupings but that’s what he will get in spades in today’s leg of his European tour in Brussels.

U.S. President Donald Trump (R) walks with King Philippe of Belgium at the Palace in Brussels, Belgium, May 24, 2017. REUTERS/Francois Lenoir

First up are meetings with European Commission President Jean-Claude Juncker and European Council President Donald Tusk - two European grandees whose presence Trump was scarcely aware of when he was congratulating Britain on voting to leave their club. They will be seeking some reassurance that, even if Trump won’t be converted into an enthusiastic supporter of the EU, he won’t actively be egging on others to quit the bloc.

No less delicate is his next stop just up the road at NATO, an organisation he famously warned was risking obsolence. The meeting there will mostly be about ceremony and pre-cooked deals: the alliance is moving into its new billion-dollar headquarters and Trump is expected to unveil a memorial to the Sept. 11, 2001 attacks placed at its entrance.

NATO officials hope the steel wreckage from one of the Twin Towers will remind Trump that the only time the alliance has activated its collective defence clause was following the attacks on New York and Washington, a decision that also sent NATO into Afghanistan to fight the militants behind them.

British police press on with the hunt for a suspected militant network behind the Manchester bombing, fearing a second attack could be imminent.

Prime Minister Theresa May is expected to raise with Trump in Brussels the problem of security leaks from the U.S. side, not least the latest NYT pictures of the crime Scene. Officials are reported to be “furious” over the leaks. Eight people are now in custody. Bomber Salman Abedi’s father and brother have been arrested in Tripoli and presumably Britain will be seeking access to them. Reuters interviewed the father just before he was detained.

City council employees move flowers from the townhall in Albert Square to St Ann's Square in Manchester, Britain, May 24, 2017. REUTERS/Peter Nicholls


A relatively benign reading on the U.S. interest rate outlook from the Federal Reserve’s minutes of its latest policy meeting have encouraged fresh gains in U.S. equities to record closing highs, a softer dollar and Treasury yields and a recoil of the VIX volatility gauge back below 10 percent intraday on Wednesday. That combination has been enough for a renewed surge in Asian equities, with Shangahi bouncing back more than 1 percent after yesterday’s brief wobble on China’s sovereign debt downgrade.

Seoul’s Kospi was also up more than one percent, with the Hang Seng and Nikkei225 also rising briskly. MSCI’s index of world stocks is at a new record high this morning, with year-to-date gains now topping 10 percent. MSCI’s emerging markets index is within a whisker of two-year highs, meantime.

With Thursday’s OPEC meeting expected to extend crude oil output cuts into 2018, oil prices were buoyed above $54 and this helped energy stocks too.

The Fed minutes were marginally dovish, stating in May that it’s overall assessment of the economy going forward was unchanged but that it was seeking more evidence Q1’s slowdown was temporary before resuming rate hikes. That said, futures markets still assign an 80 percent chance it will pull the trigger again in June and so the takeaway appears more in softening the overall horizon for rate rises further out.

The still huge gap in economic surprises between the Europe and the U.S. meantime has been enough to pump euro/dollar above $1.12. Underlining the upbeat mood in the world economy in general, the latest cut of world trade data from the Dutch statistics agency seen as the arbiter of the series showed trade voles up 1.5 percent in March and 1.4 percent quarter-on-quarter in Q1 – remarkable in the light of protectionist worries following the U.S. election.

Also eye-catching on Wednesday was the Riksbank’s warning on the serious threat to the economy from an overheating housing market and its tightening of bank leverage ratios as a result – a macroprudential policy move that also spotlights the adverse consequences of a prolonged zero interest rate policy.  With Germany, Austria and Nordic markets out for a public holiday, market attention will shift to the OPEC meeting, the latest leg of US President Trump’s overseas trip in Brussels and UK GDP revisions.

Editing by Toby Chopra

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