Trump’s threat on Mexico cripples stocks

US President, Donald Trump threat to shut down US government if Congress fails to approve fund needed to build a Mexico border wall has resulted in the sliding European and US of stocks.

Stocks had staged a solid rally Tuesday, in part reflecting optimism that Trump-related controversies were receding and that long-awaited tax overhauls could take centre stage.

But in a speech late in the day, Trump vowed to build the border wall even “if we have to close down our government” and to pull out of the NAFTA trade agreement with Canada and Mexico.

But market analyst Jasper Lawler at London Capital Group downplayed the risk of a shutdown.

“We think this is basically a bluff by Trump to get his ‘Great Wall’ back on the agenda and show some political rebellion following his foreign policy capitulation in Afghanistan,” he said in a note to clients.

Investors were also looking ahead to getting fresh clues from US Federal Reserve boss Janet Yellen about plans to reduce its huge bond holdings, and from ECB chief Mario Draghi about its cutting back of bond purchases.

“Equity markets in Europe are marginally lower on the day as traders are in wait-and-see mode ahead of the Jackson Hole symposium that starts tomorrow,” where both Yellen and Draghi are scheduled to speak, said CMC Markets UK analyst David Madden.

Paris shed 0.3 percent and Frankfurt lost 0.5 percent, while London bucked the trend to end the day flat.

The Dow was down 0.2 percent nearing midday.

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“US stocks are lower in early action following yesterday’s solid advance, with global trade concerns and Friday’s looming speeches from Fed Chair Yellen and ECB President Draghi likely keeping conviction in check,” said analysts at Charles Schwab.

The euro gained against the dollar following well-received eurozone data, analysts said.

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“Manufacturing and services PMIs from the eurozone, Germany and France were all very strong and well above the level that separates growth from contraction, suggesting that the recovery is continuing to gain traction,” said Craig Erlam, senior market analyst at Oanda trading group.

In London, British advertising giant WPP saw its shares slump nearly 11 percent after the company cut its full-year revenue forecast.

“WPP is very much seen as the bellwether of the advertising industry and as such is widely regarded as a global economic barometer and so it is unsurprising the shares have reacted,” Graham Spooner, investment research analyst at The Share Centre, said in a note to clients.

Original link:https://www.cmcmarkets.com/en-gb/news-and-analysis/market-analysts/david-madden