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Daily Briefing: Leaks at the top - Trump report unnerves allies
May 16, 2017 / 7:14 AM / 6 months ago

Daily Briefing: Leaks at the top - Trump report unnerves allies

LONDON (Reuters) - The White House has issued an official denial but reports that President Donald Trump disclosed highly classified information to Russia's foreign minister about a planned Islamic State operation will unnerve key U.S. allies in Europe, the Middle East and beyond.

President Donald Trump speaks at the National Peace Officers Memorial Service on the West Lawn of the U.S. Capitol in Washington, U.S., May 15, 2017. REUTERS/Kevin Lamarque

The intelligence, shared at a meeting last week with Russian Foreign Minister Sergei Lavrov and Russian Ambassador Sergei Kislyak, was supplied by a U.S. ally in the fight against the militant group, officials told Reuters after the story first came out in the Washington Post.

The question is what repercussions this has now for America’s main security relationships, be it through NATO, the Five Eyes intelligence-sharing network with English-speaking countries, or bilaterally with states ranging from Saudi Arabia to Israel.

A EU court rules this morning on the parts of trade policy, notably free trade agreements, which Brussels can decide on its own and which parts have to go through the more lengthy and tricky prospect of needing approval by national (and sometimes regional) partnerships of all EU member states. This has come up because of the trade deal the bloc has put together with Singapore - but it also has a bearing on other future deals the EU will strike - notably any eventual deal with Britain.

We get the latest read-out on the euro zone’s recovery at 0900 GMT with flash GDP figures for the first quarter. Economists polled by Reuters expect a quarterly rate of 0.5 percent for 1.7 percent on the year - exactly the same as for the past quarter.


Russian Foreign Minister Sergey Lavrov speaks at his news conference at the Russian Embassy in Washington, U.S., May 10, 2017. REUTERS/Yuri Gripas

Euro/dollar has recaptured the $1.10 level in early trading on Tuesday as a broad-based dollar swoon on disappointing U.S. business surveys and U.S. President Donald Trump’s latest travails combined with expectations of a robust euro zone Q1 GDP report out later.

The surprise drop in the New York Fed’s index of business activity in May, now in negative territory for the first time since October, was the latest dollar depressant as futures markets dialled back the chances of a Fed interest rate rise next month to just above 70 percent. Citi’s U.S. economic surprise index continues to plunge deeper into negative territory, falling to its lowest level since May last year while the euro zone equivalent remains close to its highest levels of the year.

Growing concern about Trump’s administration and its ability to focus on its economic stimulus plans were compounded meantime as government officials said Trump last week disclosed highly classified information to Russia’s foreign minister about a planned Islamic State operation. The dollar index is down about 0.3 percent, while 10-year U.S. yields hover about 2.34 percent.

Thanks partly to the strong rebound in Brent crude oil prices back above $52 and the spur to technology stocks from hopes of corporate re-investment in IT systems following this weekend’s global hack, stock markets have brushed off the U.S. political and economic jitters yet again and continue to push to record highs.

After Wall St indexes closed at new records, MSCI’s index of world stocks set new highs again on Wednesday too. Actual S&P500 index volatility over the past 15 days has been the lowest on record and this continues to encourage investors into higher yielding, higher risk assets worldwide.

Trump’s woes aside, the focus will turn to a packed economic data diary for the rest of the day. Alongside the euro zone GDP numbers, where annualised growth in the bloc is expected to come in almost three times faster than in the United States, there will be industrial production numbers and housing starts from the United States, inflation numbers from the UK and Germany’s ZEW.

Editing by Andrew Heavens

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