Sep 5, 2018, by Lorcan Roche Kelly
Most emerging-market currencies were weakening again this morning, with South Africa’s rand and Indonesia’s rupiah getting hit the hardest. The benchmark Jakarta Composite Index closed 3.8 percent lower, as an emergency rate hike to shore up the currency is seen as increasingly likely by some analysts. With Argentina, Brazil and Turkey all suffering their own crises plus the reduction in global dollar liquidity from a tightening Federal Reserve, developing economies are caught in something of a perfect storm.
Canada vs Trump
Canadian Prime Minister Justin Trudeau is holding firm on two key issues that have become sticking points in Nafta talks. He said that unless agreement can be reached on anti-dumping panels and an exemption for Canadian cultural industries then he’d rather see the current pact killed than accept a bad deal. Canadian Foreign Affairs Minister Chrystia Freeland is in Washington today to continue talks as President Donald Trump also threatens to walk away, despite pushback from Congress and business groups.
Trump is asking advisers if provoking a government shutdown ahead of the November midterm elections would be a good political move, according to people familiar with the matter. Congressional Republicans are seeking to complete full-year funding bills for government departments by Oct. 1 and putting off allocations to controversial issues such as the president’s border wall until after the elections. Obamacare is also likely to rear its head again, as a court case in Texas seeking to nullify the health act will play out in the run-up to the vote.
It’s not just emerging markets that are having a bad day. Overnight, the MSCI Asia Pacific Index fell for a fifth day, sliding 1.5 percent, while Japan’s Topix index closed 0.8 percent lower. In Europe, the Stoxx 600 Index was 1.0 percent lower at 5:45 a.m. Eastern Time, with Italy’s FTSE MIB the only national benchmark gauge in the region posting a gain. S&P futures pointed to a drop at the open, the 10-year Treasury yield was at 2.888 percent, and gold was higher.
U.S. trade data for July is due at 8:30 a.m., with expectations for a deficit of just over $50 billion. At 10:00 a.m., the Bank of Canada issues its latest rate decision with expectations for a hold ahead of another rate hike in October. Brett Kavanaugh’s U.S. Supreme Court confirmation hearing continues in Congress, while Twitter, Facebook, Google executives are due in Washington to testify before lawmakers on what they are doing to counter election meddling.