The explosion at a UK pop concert is being treated as a terrorist incident by the British police, but terrorism has not been definitely confirmed. Rightly, the focus is on the human consequences of the tragedy. Britain’s history suggests that this, rather than politics and economics, will remain the focus.
The United States has three political issues. President Trump is to propose a budget with USD 3.6trn of spending cuts. Former national security adviser Flynn is reported to be pleading the fifth amendment against self-incrimination. The Washington Post reports that Trump asked security officials to publically deny links between his campaign and Russia.
The details of the Russian question and policy proposals now probably matter less to investors than the question of Trump’s approval rating. If scandal and policy measures generate a very low approval rating, investors will question Trump’s tenure. A mediocre approval rating means investors will question Congressional willingness to pass Trump’s policies.
Business sentiment opinion polls are due in the Eurozone. The levels are excessively high, and at some point will have to converge with reality. That convergence should not be taken as a signal of economic weakness, just as today’s levels should not be over-interpreted as to the level of economic strength.