August 22, 2018 / 7:28 AM / in 8 months

Daily Briefing: Macron back to work after awkward summer

LONDON (Reuters) - Emmanuel Macron will be hoping to put an awkward summer behind him today when he holds his first cabinet meeting after the break, aimed at setting the pace of his next set of reforms.

FILE PHOTO: French President Emmanuel Macron with his wife Brigitte Macron and British Prime Minister Theresa May walk during a meeting at the Fort de Bregancon in Bormes-les-Mimosas, France, August 3, 2018

The French president’s aloof handling of a scandal that broke when his bodyguard was filmed beating up a May Day protester was much criticised, adding to a public image of him as distant and failing on promises to bring higher ethical standards to politics.

It remains to be seen how the affair affects support for the next batch of Macron reforms, notably a revamp of the constitution that will require cross-party backing. On the agenda today is establishing where savings can be found to reduce the budget deficit, and patching up the unwieldy pension and strained public healthcare systems.

Reuters' August poll of 90 economists released today shows they think global trade tensions will crimp euro zone growth - but not hit it too hard. The prognosis is still for growth to average a respectable 2.1 percent this year and 1.8 percent next.

If they are right, this is good news for the European Central Bank: It means that its plans to wind down an unprecedented stimulus programme will face no headwinds from the economy.

A new twist in the Italian bridge collapse story overnight: sources said state lender Cassa Depositi e Prestiti (CDP) may buy a controlling stake in Autostrade per l'Italia, the outfit that operated the motorway in question.

A ministerial source close to Prime Minister Giuseppe Conte confirmed the possibility was being considered by the ruling coalition, adding that he personally viewed it as “not a bad idea”. How much such a stake would cost is not clear - yet another question for holders of Italian bonds to ponder as many among them choose to cash in.


A new record intraday high for the S&P500 overnight underlines the split in fortunes between Wall St stocks and the rest of the world of late, with this year’s tax-cut and earnings driven rally set to make it the longest bull market on record later on Wednesday.

Political developments in Washington, where President Trump’s former lawyer Cohen testified that Trump had directed him to commit a crime during the election by making payments to silence women claiming to have had affairs with Trump, seemed to have only marginal impact on the stock market.

It’s not clear whether the threat of impeachment of the president over allegations of campaign wrongdoing and collusion with Russia - that Trump denies - is a net positive or negative for a stock market buoyed by his tax cuts but reined in by his trade wars.

For many, it’s all too uncertain still to make any conviction bets. U.S. Treasury bonds did catch a marginal late ‘safety’ bid however and 10-year yields continued to nudge lower, with the 2-to-10-year yield curve falling to another 11-year low of 22 basis points.

S&P futures are down in early trading Wednesday. After its longest streak of consecutive declines this year, however, the dollar’s DXY index has perked up on Wednesday. Dollar/yen regained a foothold well above 110/$, euro/dollar balked at the $1.16 level and retreated, and sterling struggled to hold onto the $1.29 handle.

Mid-level trade talks between the United States and China get underway later, although Trump himself said this week he did not expect a major breakthrough there. Instead, the dollar has its eye on the release of the U.S. Federal Reserve’s latest policy minutes and Friday’s Jackson Hole speech by Fed chair Powell.

Although Trump criticised Powell this week for his policy of gradual interest rate rises, the Fed is widely expected to hike again next month and some argue the Fed may now stand firmer on its tightening path as it will not want to be seen to be influenced by the White House.

Asia markets were mixed to positive overnight, with Shanghai underperforming again after a couple of days of gains and it closed down 0.7 percent. Tokyo, HK and Seoul benchmarks ended higher, however, in the slipstream of the new S&P record. European stock futures took their cue from S&P equivalents and pushed lower before the bell here.

In emerging markets, the holiday-thinned Turkish lira trading left the ailing currency still trapped on the weaker side of 6 per dollar. Trump’s national security adviser Bolton said Turkey could end the lira-battering diplomatic crisis between Ankara and Washington instantly by freeing detained U.S. evangelical pastor Brunson.

Traders work on the floor of the New York Stock Exchange, August 21, 2018

Business groups have urged Trump and Erdogan to meet to resolve the dispute as the crisis has hammered investor confidence and forced some firms to suspend their investment plans.

China’s offshore yuan weakened again after four straight up days. Russia’s rouble pushed lower as yet another wave of U.S. Treasury sanctions hit Russian entities.

— A look at the day ahead from European Economics and Politics Editor Mark John and EMEA markets editor Mike Dolan. The views expressed are their own —

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