Weekly Review: Trump Legal Trouble Mounts, Presenting New Risks to the Markets

This week, the biggest news for the market was political. On Tuesday, the former Trump campaign chair, Paul Manafort was found guilty of eight counts by a jury in Virginia. The prosecution had presented 19 counts. While the ruling had nothing to do with the Trump’s campaign involvement with Russia, it was a blow to Trump’s claims that the Mueller investigation was a witch hunt. The biggest blow was the guilty plea by former Trump’s personal lawyer, Michael Cohen who is facing multiple counts. In one count, he claims that he was asked by the president to make hush payments, which was in violation with the election financing act. This implicates the president who might find himself in more legal trouble. Traders worry that the new issues could affect the president’s delivery of key deregulatory goals.

Cryptocurrencies

This week, cryptocurrencies had a difficult week. On Wednesday, the SEC rejected nine ETF cryptocurrencies related ETFs. This was a highly waited decision by cryptocurrencies participants who expected that the ETFs would lead to more demand from institutional investors. The large sophisticated investors have a challenge of buying cryptos in large scale because of the difficulties involved in dealing with the exchanges. Just last month, Blackrock, the second largest asset manager in the world announced that it would enter the crypto industry, exciting the markets.

Fed Minutes

The Federal Reserve released minutes of a meeting held early this month. The minutes did not have a major news. The main news was that the officials were set to do a rate hike in September. As they do this, they will continue to monitor the data to see impacts of the ongoing trade conflict. Some members seemed focused on rejecting interest rates hikes that would invert the yield curve, an indication that the Fed might put breaks on rate hikes in 2019.

Australia Politics

This was an interesting week for the Australian economy. On Tuesday, Malcom Turnbull survived an ouster bid. On Thursday, he was set to resign after a number of his ministers resigned from the cabinet. This creates an interesting period of uncertainty for the country, which has had 5 prime ministers in the past ten years. There are also concerns about who will take over after his resignation. Most members of his party seems to support Julie Bishop, who has stood with Turnbull. The country will go to an election in 2018.

Oil Inventories

On Wednesday, the EIA released the inventory data. The data showed a drop of inventories of 5.8 million barrels, which was higher than the expected drop of 2.9 million barrels. Previously, the American Petroleum Institute (API) released data that showed inventories drop of 5.2 million. After the data, crude oil prices had the biggest gains in more than a month.

EU Data and Minutes

On Thursday, the European Central Bank (ECB) released minutes for the previous minutes. The minutes showed that officials were starting to feel optimistic about inflation. They also talked about their vague guidance about an interest rate hike that will happen after summer of 2019. ECB watchers have said that the forward guidance was too vague. They also voiced their concerns about trade.

NAFTA

This week, the talks on NAFTA continued. On Wednesday, the Mexican representative said that a deal could come as soon as possible. At the core of the stagnation is the suggestion from the Trump administration that Mexico has led to the demise of American firms. To help this, he has suggested increasing issues of rules of origin, and letting the deal have a renewable expiry period.

US-China Trade talks

Talks between US and China started on Wednesday in Washington. The talks are meant to prevent the two biggest economies from being engaged in an all-out trade war. The expectations for these talks were low, with the US set to continue increasing tariffs on Chinese goods. The Chinese team has not offered any concessions on its trade practices, only promising that it would increase its purchases of American products. However, with the US midterm elections in the horizon, some believe the Trump administration will move to do a deal with the Chinese.

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