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Factbox: Market Participants React To U.S. Presidential Debate

Factbox: Market Participants React To U.S. Presidential Debate

(Reuters) – Democrat Hillary Clinton and Republican Donald Trump traded barbs and accusations Monday night in the first debate between the two ahead of the Nov. 8 U.S. presidential election.

Financial market participants followed the event closely, and markets were on the move throughout. U.S. equity index futures turned from modestly negative as the event began to a gain of more than 14 points by early Tuesday morning.

In currencies, the Mexican peso was a big mover, gaining more than 1.7 percent against the dollar during the event. It has been dubbed the “Trump thermometer” because of his campaign pledge to build a wall along the border with Mexico to prevent illegal immigration and to renegotiate the North American Free Trade Agreement.

Following is a compilation of reaction to the debate from investors, economists and financial market analysts.

FACTBOX: Swing states that may determine the election: http://reut.rs/1UhE642

MORE COVERAGE: cpurl://apps.cp./cms/?pageId=us-2016

COMMENTS:JACK ABLIN, CHIEF INVESTMENT OFFICER AT BMO PRIVATE BANK IN CHICAGO:

“Investors celebrated that Hillary didn’t lose. Market trading higher and the peso is strengthening.”

“Hillary came through the debate unscathed. Trump spent more time on the defensive.” BRIAN JACOBSEN, CHIEF PORTFOLIO STRATEGIST, WELLS FARGO FUNDS MANAGEMENT, MENOMONEE FALLS, WISCONSIN:

“I’m not sure I learned anything new listening to the debate. Neither candidate imploded, but based on the strengthening of the Mexican Peso during the debate, I think this round goes to Clinton.”

RANDY FREDERICK, MANAGING DIRECTOR, TRADING AND DERIVATIVES, CHARLES SCHWAB, AUSTIN, TEXAS:

“The Positive reaction in the (equities) futures markets probably implies that Hillary Clinton was perceived as the winner. The market is often said to dislike uncertainty, and most experts seem to consider Donald Trump as the more uncertain candidate. Things could certainly change by morning, and a downturn in the futures between now and morning would likely imply an overnight shift in favor of Trump. I would be surprised to see that.”

PETER KENNY, SENIOR MARKET STRATEGIST, GLOBAL MARKETS ADVISORY GROUP, NEW YORK:

“Both futures and the Mexican peso are accurate indicators of how markets interpreted the debates. Both moved only modestly but both also moved in tandem – higher. I believe that investors pricing in the odds of either candidate winning. Modest positive moves suggest that the Clinton campaign both managed expectations and delivered on beating them. The fear for investors was that she would either; have some physical issue, look weak or have an excuse for one or both. She looked sharp, on point and clearly delivered on a message and style that reassured markets. The Mexican peso’s rise in the time frame of the debate underscores that. The Mexican peso has risen but largely fallen in lock step with the perception of (Clinton’s) prospects for obvious reasons given (Trump’s) take on NAFTA.”

“I would suggest that the moves in both instruments were only modest but that we may see equity markets attempt at a reversal from today’s drubbing. If that occurs, it will likely have a short shelf life.”

BRIAN BATTLE, DIRECTOR OF TRADING, PERFORMANCE TRUST CAPITAL PARTNERS, CHICAGO:

“Debate really was not outside expectations. Trump was Trump and Clinton kept calm and seemed bemused.

“It was underwhelming on policy and there were no gaffes, or revelations. It was a personality debate, not a policy discussion.”

AARON JETT, VICE PRESIDENT, GLOBAL EQUITY RESEARCH, BEL AIR INVESTMENT ADVISORS, LOS ANGELES:

“The market wants Hillary to win. The better she does (or the worse Trump does) the better the market will do in the short term. She did well enough to sustain the market for now. She did fine and Trump rambled on at times making her look better. We should gain back some of what we lost on Monday.”

J.J. KINAHAN, CHIEF STRATEGIST, TD AMERITRADE, CHICAGO:

“It is interesting that in a debate that was so full of negatives from both sides, the result in the Stock Index Futures was very positive. I guess it does show that some positives can come from an absolute free for all. I don’t know that we learned much about the candidates but the market definitely liked it. Don’t forget in the middle of this we also had some numbers showing slightly better growth than previously expected and that also helped the last 5 points or so in the futures rally.

“Finally after a weak day some of this may just be people covering their risk overnight. We did see the Mexican peso rally during the debate although it has been much weaker over the last few weeks as the rhetoric did not seem as strong as we have seen earlier.”

MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISER, ALLIANZ, NEWPORT BEACH, CALIFORNIA:

“While both candidates spoke to the importance of higher economic growth whose benefits are shared more broadly, the debate highlighted their different approaches to tax policies and what ultimately delivers greater prosperity.”

HUGH JOHNSON, CHAIRMAN AND CHIEF INVESTMENT OFFICER, HUGH JOHNSON ADVISORS, ALBANY, NEW YORK:

“Both presented different views on reviving the economy. Secretary Clinton’s tax and spending plans were well articulated and well thought out. Trump’s thoughts that included significant tax cuts and implicit promises of infrastructure spending were emotionally appealing but not nearly as well thought out or economically sensible. Each will appeal to different sets of voters. A good example of Trump’s emotional, yet uninformed, thoughts were his comments (a) that the recovery was the ‘worst’ ever, (b) that Janet Yellen was political, (b) the rise in stock prices has been a bubble that would ‘burst’ if interest rates were increased.

“In my view Ms Clinton presented herself as being far more informed and presidential while Trump presented himself as being quite uninformed but emotionally appealing. I would be inclined to give Secretary Clinton a modest edge although Trump did a good job presenting himself as the candidate of change.

“Her stamina answer was a real good – close to a clincher.”

JEFFREY GUNDLACH, CHIEF EXECUTIVE, DOUBLELINE CAPITAL, LOS ANGELES:

“It’s the establishment versus the anti-establishment. No one ‘wins’ a debate in September. Trump did himself a little bit of good, and set up the later debates to his advantage.”

DAN IVASCYN, GROUP CHIEF INVESTMENT OFFICER, PIMCO, NEWPORT BEACH, CALIFORNIA:

“We continue to believe a Clinton victory will be the most likely outcome. Nothing tonight to change that view.”

MARKET REACTION:

STOCKS: S&P 500 emini futures gained ground over the course of the debate, with the contract price moving from down 5 points as the event began to up 14 points by early Tuesday morning, a few hours after it finished.

BONDS: 2- and 10-year Treasury yields rose modestly

FOREX: The Mexican peso gained 1.7 percent against the dollar. The dollar index, meanwhile, was little changed as were exchange levels against the yen and euro

(Americas Economics and Markets Desk; +1-646 223-6300)

Photo: Republican U.S. presidential nominee Donald Trump is accompanied by his relatives, including his wife Melania (2nd from L) at the conclusion of the first debate with Democratic U.S. presidential nominee Hillary Clinton at Hofstra University in Hempstead, New York, U.S., September 26, 2016. REUTERS/Brian Snyder

A Trump Presidency Would Sink All Boats

A Trump Presidency Would Sink All Boats

Hello, investors. Come join the foreign policy experts in daily panic attacks over what a President Donald Trump would mean for your world. What does one do about a candidate whose tax plan would send America into the fiscal abyss — who flaps lips about not making good on the national debt?

Should we be investing in the makers of Xanax and Klonopin? And on the personal side, are there enough benzodiazepines to go around?

We’re not talking just about the very rich. Anyone with a retirement account or a small portfolio has something to lose. The economic consensus is that a Trump presidency would sink all boats. And that certainly applies to Trump’s own economically struggling followers in the least seaworthy craft.

“Most Rust Belt working-class Americans don’t get it,” Bob Deitrick, CEO of Polaris Financial Partners in Westerville, Ohio, told me. “The working class thinks he’s going to stick it to the elites.”

The facts: The Trump tax plan would deliver an average tax cut of $1.3 million to those with annual incomes exceeding $3.7 million. The lowest-income households would get $128. (No missing zeros here.)

Folks in the middle would see federal taxes reduced by about $2,700, which sounds nice but would come out of their own hide. Medicare and other programs that benefit the middle class would have to be slashed. So would spending on science research, infrastructure and services essential to the U.S. economy.

Or we could skip the very deep spending cuts and see the national debt balloon by nearly 80 percent of gross domestic product, calculation courtesy of the Tax Policy Center.

Some might think that Trump’s tax plan — including the repeal of the federal tax on estates bigger than $5.43 million — would impress the income elite, but they would be wrong. In a recent poll of Fortune 500 executives, 58 percent of the respondents said they would support Hillary Clinton over Trump.

Most in this Republican-leaning group are undoubtedly asking themselves: What good is a fur-lined deck chair if the ship’s going down?

Then there are the others.

“Do middle-class Americans have any idea what could happen to the economy or the stock market if our president ever vaguely suggested defaulting on the national debt?” Deitrick asked. (His clients tend to be upper-middle-class investors.)

He recalls the summer of 2011, when a congressional game of chicken over raising the federal debt ceiling led to the possibility of a default. The Dow lost 2,400 points in a single week. And taxpayers were hit with $1.3 billion in higher borrowing costs that year alone.

Trump said on CNN that he is the “king of debt,” which in practice means he frequently doesn’t honor it. That’s why many major lenders shun him, talking of “Donald risk.”

Speaking of, Trump famously said in a Trump University interview, “I sort of hope (the real estate market crashes), because then people like me would go in and buy.”

But he also predicted that the real estate market would not tank — shortly before it did. Perhaps he never figured out there was a housing bubble. Or it was part of a clever scheme to peddle real estate courses with brochures asking, “How would you like to market-proof your financial future?”

Imagine a whole country taking on “Donald risk.”

The business community runs on stability. It can’t prosper under a showman who says crazy things and denies having said them moments later. A Trump presidency promises more chaos than a Marx Brothers movie — and you can believe it would be a lot less fun.

 

Follow Froma Harrop on Twitter @FromaHarrop. She can be reached at fharrop@gmail.com. To find out more about Froma Harrop and read features by other Creators writers and cartoonists, visit the Creators Web page at www.creators.com.

Photo: U.S. Republican presidential candidate Donald Trump hands a five-dollar bill back to a supporter after signing it for her following a rally with sportsmen in Walterboro, South Carolina February 17, 2016. REUTERS/Jonathan Ernst

Internet Caretaker ICANN To Escape U.S. Control

Internet Caretaker ICANN To Escape U.S. Control

San Francisco (AFP) — The head of the private agency entrusted with running the Internet has said that the group is on course to break free of U.S. oversight late next year.

Internet Corporation for Assigned Names and Numbers (ICANN) chief Fadi Chehade expressed his confidence in the move during a press briefing at the opening of the nonprofit organization’s meeting this week in Los Angeles.

“ICANN is in a very solid, confident place today,” Chehade said of its readiness for a ‘post U.S.-government role’ in charge of the Internet addressing system.

The timeline for the shift is months rather than years, according to Chehade.

While cautioning that there was no strict deadline, he said that substantial progress has been made toward ICANN being answerable to a diverse, global group of “stakeholders” and not the just the U.S. government, as has long been the case.

The U.S. government in March of this year announced that it is open to not renewing a contract with ICANN that expires in about 11 months, provided a new oversight system is in place that represents the spectrum of interests and can be counted on to keep the Internet addressing structure reliable.

ICANN plans to hand a proposal fitting the bill to the U.S. Department of Commerce next year.

“If the U.S. government is satisfied, they would not renew the contract,” Chehade said.

“There are many people in the community who would like to see we not renew the contract past 2015.”

If U.S. officials are unhappy with the proposal, the contract could be renewed for a short period to allow time for it to be revised.

– Grabs for control –

As the U.S. steps back from overseeing ICANN, states and corporations are grabbing for the reins.

ICANN has gone from being behind the scenes tending to the task of managing website addresses to being center stage in a play for power on the Internet.

“Governments want to exert control over the sweeping transnational power of the Internet that is effecting their policies, politics, social fabric, and/or their economic conditions,” Chehade told AFP just days before the group gathered in Los Angeles to tackle an array of hot issues.

“The other groups are large corporations concerned about security issues,” he continued while discussing forces striving for influence over the organization.

“Therefore, they are stepping in with force to figure out how to reduce potential harm to customers and to their businesses.”

Governance of the Internet will be a high-profile topic at the ICANN 51 meeting that will continue through October 16 in Los Angeles.

U.S. Commerce Secretary Penny Pritzker addressed the gathering on Monday, affirming support for ICANN being accountable to the “global multistakeholder community” and not to any single organization.

“Let me be clear about this,” Pritzker said.

“The United States will not allow the global Internet to be co-opted by any person, entity or nation seeking to substitute their parochial world view for the collective wisdom of this community.”

The ICANN 51 agenda includes tackling whether identities of those running websites should be public or whether privacy should be safeguarded and operators true names revealed only with proper court orders.

Another hot topic is the historic roll-out of a vast array of new domain names that has seen controversy over website address endings such as .wine or .gay.

“There is quite a bit of thematic focus on the top-level domain space,” Chehade said, referring to online neighborhoods making debuts.

“ICANN is not in the content policing business; this is not what we do,” he added when asked about potential for some domain operators to allow inappropriate material.

“We just want to make sure the company that gets the domain can deliver on what they say and do it with reliability.”

AFP Photo/Roslan Rahman

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Fed To Tweak Message In Policy Meeting: Analysts

Fed To Tweak Message In Policy Meeting: Analysts

Washington (AFP) — The Federal Reserve is expected to maintain its slow march toward a normal monetary stance in its policy meeting Tuesday and Wednesday.

But a small, key adjustment to its messaging could confirm growing confidence in the economy.

After the surprisingly poor jobs market report for August, pressure has alleviated somewhat on the Federal Open Market Committee from so-called inflation hawks to move soon to raise interest rates.

And although U.S. economic data Friday showed encouraging improvements in consumer spending and confidence, it likely is not enough to sway the FOMC off its plan to increase interest rates only as early as mid-2015.

“We expect the FOMC to have a moderately hawkish tone at its 16-17 September meeting,” said Thomas Costerg at Standard Chartered.

“The FOMC may update its exit principles, but there should be no surprises.”

The FOMC’s main policy action of the past year, the steady reduction of its once-$85 billion a month bond-buying stimulus program, will continue with the aim of winding it up completely in October.

The next step after that would be to begin raising the benchmark fed funds interest rate, stuck at zero since the end of 2008, and now blamed for overheating asset markets around the globe.

So far the Fed has stuck to its forecast — based on the averaged expectations of FOMC members — that interest rates won’t be lifted before the second half of 2015, and only slowly after then.

So far, too, inflation has remained repressed, providing the hawks with little to back their calls for an earlier rate hike.

But the labor market, and how that will shape inflation, remains a conundrum, and the FOMC is unlikely to change policy until they are more clear about it.

– Waiting for data? –

After seven straight months over 200,000, job generation plunged to 142,000 in August, raising questions over whether the economy is weaker than even doves like Fed chair Janet Yellen had thought.

Yellen’s stance since taking over the Fed in February has been to wait for the data, which means likely looking to see how the jobs market performs this month and next.

On the other hand, the Fed could adjust its message to the markets based on how it sees policy unrolling.

“Forward guidance” has played a crucial policy role since the 2008-09 recession, used to assure skittish market and business how long they can expect a hyper-loose monetary policy with ultra-low interest rates.

To reassure markets, in December when the FOMC embarked on its “taper” of the stimulus, it also assured that the end of the program would not lead directly to a rate hike.

The official guidance in FOMC policy statements was that any rate increase would come “a considerable time” after the stimulus program ends, with Yellen at one point suggesting six months.

Increasingly, though, some Fed inflation hawks and doves alike argue that the “considerable time” qualification ties their hands on policy, especially if inflation picks up suddenly.

Charles Plosser, the long-time inflation hawk who leads the Philadelphia branch of the Fed, objected to the phrase in the last FOMC meeting and voted against the Fed policy statement.

“Given the clear progress we have made toward achieving our long-term goals over the past year, and the progress and momentum that appears to be building in the economy and in the broader labor market, I no longer believe that the forward guidance language in the statement is appropriate or warranted,” he explained.

But such a move — which could curb excessive risk-taking in already sky-high markets — might be held off as the FOMC seeks more certainty on the economy’s path, said analysts at IHS.

“Even if the Fed was contemplating making the change next week, the disappointing August jobs report will likely stay their hand so that they can be sure that what was probably a fluke was in fact a fluke.”

AFP Photo/Justin Sullivan

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