Overseas Headlines – August 23, 2017


Euro-Area Factories Feed Best Growth Spell for Economy in Years

Surging demand for ‘Made in the Euro Area’ goods is feeding an economy that is creating jobs and finally also seeing price growth accelerate. A Purchasing Managers’ Index for manufacturing rose to 57.4 in August from 56.6 in July, according to IHS Markit. That’s the highest reading in two months and compares with a median estimate for a slowdown in activity. Momentum in services unexpectedly cooled to a seven-month low. The 19-nation euro economy gathered pace in the second quarter as more countries joined the recovery. Steadily declining unemployment and business confidence at a decade high are feeding confidence that inflation — still well below the European Central Bank’s goal — will eventually pick up on a sustained basis. Manufacturers recorded an “impressive” performance, with export orders surging at the fastest pace in more than six years, IHS Markit said, adding that demand in services grew at the slowest rate since January. Input costs and output prices in both sectors increased at faster rates in August.




Wall Street rally set to end after Trump’s comments

U.S. stocks were set to open lower on Wednesday as investors pulled back after President Donald Trump warned of a government shutdown to build a Mexico border wall and threatened to terminate a trade agreement with Mexico and Canada. “If we have to close down our government, we’re building that wall,” Trump said at a rally in Phoenix, Arizona, in reference to his pledge to tighten immigration controls at the U.S.-Mexican border. Trump also said he might scrap the North American Free Trade Agreement with Mexico and Canada to jumpstart negotiations. The three countries ended their first round of talks on Sunday, as they aim to revamp the NAFTA by early 2018. Investors have grown increasingly concerned about Trump’s ability to legislate his pro-growth agenda, especially those of tax cuts and infrastructure spending, given the near constant political rumblings in the White House.



South America:

Brazilian inflation below forecasts, hits fresh 18-year low

A smaller-than-expected rise in Brazil’s consumer prices in mid-August pushed annual inflation to a new 18-year low, keeping the central bank on track to cut interest rates aggressively. The IPCA-15 consumer price index fell to 2.68 percent in the 12 months through mid-August, below the 2.73 percent expected in a Reuters poll and down from 2.78 percent in mid-July, statistics agency IBGE said on Wednesday. The reading is far below the bottom end of the central bank’s annual target range of 4.5 percent plus or minus 1.5 percentage point, weighed down by a deep recession and a double-digit unemployment rate. Slowing inflation in Brazil parallels weakening price pressures in developed economies, where tepid global economic growth has kept central banks on edge. Still, Brazilian consumer prices rose 0.35 percent in the month to mid-August thanks to a one-off increase in fuel taxes, as well as a regulatory decision to raise power rates as scarcer rains sapped hydroelectric generation. Economists expected a 0.40 percent monthly increase. Yields paid on interest rate future contracts fell after the release as traders increased bets that the central bank will cut the benchmark Selic rate by 100 basis points at its September meeting, which would be the fourth straight cut of

that magnitude.