July 5, 2017 / 7:24 AM / 3 years ago

Daily Briefing: Trump in Warsaw - transatlantic showcase?

LONDON (Reuters) - If he chooses to use it, U.S. President Donald Trump has a chance to patch up trans-Atlantic ties this week as he returns to Europe for a trip anchored around the G20 summit in Hamburg starting on Friday.

U.S. President Donald Trump waves at Joint Base Andrews, Maryland, U.S., upon his return to Washington after a weekend at the Trump National Golf Club in Bedminster, New Jersey, July 3, 2017. REUTERS/Yuri Gripas

Today’s stop-over in Warsaw is being billed by his aides as a showcase of his commitment to NATO after he pointedly failed to re-affirm the alliance’s mutual self-defence clause during an earlier trip.

Poland, one of the few countries in the alliance to meet its defence spending targets, should be the perfect venue to set out NATO’s determination to stand up to Vladimir Putin’s Russia - but will he take it? EU officials are meanwhile worried Trump’s decision to turn up for a meeting of east European leaders discussing a local trade and investment pact for countries bordering the Adriatic, the Baltic and the Black Sea will embolden some of the more autocratic leaders in the region - not least his Polish hosts.

The shadow of Trump will also loom large over a pre-G20 meeting between Germany's Angela Merkel and Chinese President Xi Jinping today. His "America First" policy on trade has effectively pushed Berlin into an awkward embrace with Beijing on global commerce despite concerns about human rights in China, frustrations over market access and worries about a wave of corporate takeovers in Europe by state-run Chinese firms.

After lunch to plot strategy, the two leaders will open a $10-million Chinese compound in Berlin Zoo for two giant pandas that China is lending to Germany - a token of friendship between the two countries but also a way for China to show its cuddly side.


The latest tensions over North Korea’s missile capability, much like other political events this year, has so far failed to inject any significant volatility into world markets that are searching for a new direction after the U.S. Independence Day holiday.

While there was a very slight bid in U.S. Treasuries and gold overnight, South Korea’s Kospi stock index actually closed 0.3 percent higher, the won was steady after a wobble on Tuesday and Japan’s yen quickly gave back some marginal gains.

The trail also seems to have gone cold on central bank policy, with little follow-through from other central banks to what last week appeared to be a collective signal from the world’s major central banks on tightening up monetary policy. There was no such signal yesterday from the Reserve Bank of Australia or Sweden’s Riksbank, which held out the possibility of further easing, and European Central Bank officials have been keen to downplay any sense of an imminent turn – spooked in part by last week’s outsize bond market reaction. ECB chief economist Praet said on Tuesday that the ECB’s mission to get inflation back to target was not yet accomplished.

On that score, oil has been helping a little over the past week or so and base effects affecting headline inflation rates are turning positive again. Brent crude is now up more than 3 percent year-on-year, as it tries to reclaim the $50 handle. And with the Federal Reserve’s latest meeting minutes due out later on Wednesday, attention is shifting back to the Fed’s overall stance. Futures markets are currently pricing in a 50-50 chance of another interest rate rise by the end of the year, but the June payrolls report out on Friday may shift that dial.

The dollar index was steady overnight, with Asia bourses mostly in positive territory. European stocks, meantime, are expected to open about 0.3 percent lower. Global service sector PMIs are the main data points before then, with China’s already coming in lower.

Editing by Andrew Heavens

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