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Four plus one for politics and markets

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Politics, regrettably, dominates the headlines today. The pure world of economics will take second place to political noise. There are four US led political issues that will have mixed consequences for investors and markets.
  • US President Trump tweeted "only one thing will work" for North Korea (but would not say what that one thing was). Markets are very unlikely to price in risks of disaster scenarios, however. The US and Turkey have suspended travel visas with one another. This has pushed down the Turkish lira, which is dependent on international capital flows.
  • US President Trump has suggested that the DACA (or "dreamers") immigration reform would have to include funding for the big beautiful wall. There is some evidence that US citizens of Hispanic origin are increasing precautionary savings. This week, Trump has to decide whether Iran is complying with the nuclear deal. There may be tensions within the US government and with the EU if compliance is denied.
  • Europe's politics focuses on Spain and Catalonia. This week is expected to see greater clarity over the dispute. Catalonia-based banks have started to move headquarters from the region. There are parallels to bank pledges and bank deposit shifts around the Scottish independence referendum.