February 28, 2018, by Lorcan Roche Kelly
The S&P 500 Index finished yesterday’s session 1.3 percent lower, its biggest decline in more than two weeks, after testimony from Federal Reserve Chair Jerome Powell in Congress was viewed as hawkish by markets. Overnight, the MSCI Asia Pacific Index retreated 1.1 percent, while Japan’s Topix index closed 1.2 percent lower. In Europe, the Stoxx 600 Index was 0.4 percent lower at 5:50 a.m. Eastern Time, with the gauge having its worst month since June 2016. S&P 500 futures were pointing to a slight rebound at the open, the 10-year Treasury yield was at 2.901 percent and gold was higher.
Well below 2 percent
Eurostat’s flash inflation estimate for February showed a drop to 1.2 percent, in line with expectations. This third successive decline in euro-area consumer price growth will likely keep the pressure off European Central Bank President Mario Draghi as debate intensifies over when the bank’s QE program will be phased out. The euro was broadly unchanged at $1.2228 after that data was released.
U.S. Treasury Secretary Steven Mnuchin said that joining the Trans-Pacific Partnership is an option for President Donald Trump who withdrew the U.S. from the trade negotiations when he took office last year. The president himself last week said he’d consider rejoining if more favorable terms could be negotiated. The 11-member pact, which accounts for 13 percent of global GDP, survived the withdrawal of the U.S., and is due to sign a final deal in Chile next month.
The European Union will publish its draft Brexit deal this morning, which British Prime Minister Theresa May is expected to reject. According to a senior U.K. official, May will take issue with EU plans to allow the European Court of Justice to oversee the final deal and the possibility that a separate trading regime could be implemented for Northern Ireland. On the home front, the prime minister is becoming increasingly boxed in by rebels within her own party who feel she’s either not doing enough to implement a full Brexit or pushing too hard for a complete break with the EU.
Economists surveyed by Bloomberg expect U.S. fourth-quarter GDP to be revised slightly lower to 2.5 percent when the data are published at 8:30 a.m. The second reading of core PCE, the Federal Reserve’s preferred inflation gauge, is also due at 8:30 a.m. and is expected to remain unchanged at 1.9 percent. In earnings, Valeant Pharmaceuticals International Inc.’s 2018 outlook will be closely watched when it reports before the bell, as investors assess the debt-ridden drugmaker’s turnaround strategy.