In the News

Impeachment React in Markets?

11/21/2019
Politico

Impeachment react? — The Dow Jones took a bit of a dip as President Donald Trump’s top Europe envoy Gordon Sondland told House impeachment investigators that there was clearly a quid pro quo between Ukraine aid and an investigation into Joe Biden and his family. Some traders and money managers lit up MM’s email box to suggest this was the first significant market reaction to impeachment

RSM’s Joseph Brusuelas: “Are you watching the inter day movement? Bond yields holding up but equity market turned over at 12:47 PM. Looks like first signs of impeachment impacting financial markets.

Others said, forget it, it’s all trade. And they referenced stories suggesting Chinese anger over the congressional bill aimed at protecting human rights protesters in Hong Kong. They said this anger — coupled with other roadblocks — could further threaten a phase one deal with China, sending stocks down.

Cumberland’s David Kotok: “Markets fear trade war worsening, December 15 tariffs, and more delays. Impeachment is a non-economic political show.” What’s your take? Email me on bwhite@politico.com.

There is still zero conviction on Wall Street that Trump will be removed. But Sondland’s dramatic opening statement and testimony seemed like the biggest risk to Trump so far. The fear is less that Trump might go than over the risk of chaos and uncertainty should the outcome of a Senate trial seem less than certain.

GOOD THURSDAY MORNING — Email me at bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver at aweaver@politico.com and follow her on Twitter @AubreeEWeaver.

Driving the Day

House Financial Services subcommittee has a hearing at 9:30 a.m. on consumer data protection … Jobless claims at 8:30 a.m. expected to dip to 218K from 225K … Philadelphia Fed Survey at 8.30 a.m. expected to rise to 6.0 from 5.6 … Index of Leading Indicators at 10:00 a.m. expected to dip 0.2 percent … Existing Home Sales at 8:30 a.m. expected to jump to 5.49M from 5.38M …

DEBATE WRAP — Again, not a game-changer and not a ton of Wall Street bashing beyond Elizabeth Warren fighting for her wealth tax and saying, “I’m tired of free-loading billionaires.” For all the talk of a gang-up on Pete Buttigieg, it never really happened, save for some Tulsi Gabbard flailing at the end.

Joe Biden again was not at all great. He started with a stumbling answer, referred to “punching at it” when talking about violence against women and said he had the endorsement of the only African American woman elected to the Senate with Sen. Kamala Harris on stage. But he wasn’t awful. So MM is not sure this will be the debate that changes very many minds. China, trade and the economy did not get much play at all.

THE END OF WORLD TRADE AS WE KNOW IT — Our Adam Behsudi with Finbarr Bermingham of the South China Morning Post: “The world will not end on December 10, yet for many who have spent their careers within the global trading oversight system, the date has apocalyptic consequences. That is when the World Trade Organization’s highest dispute-resolution body will cease to function after the administration of …. Trump blocked reappointments to the panel.”

CHINA DEAL IN TROUBLE? — Reuters’ Heather Timmons: “Completion of a ‘phase one’ U.S.-China trade deal could slide into next year, trade experts and people close to the White House said, as Beijing presses for more extensive tariff rollbacks, and the Trump administration counters with heightened demands of its own.”

LIGHTHIZER/PELOSI TO MEET — Our Sabrina Rodriguez: “U.S. Trade Representative Robert Lighthizer will meet with Speaker Nancy Pelosi and Ways and Means Chairman Richard Neal (D-Mass.) on Thursday to discuss the USMCA as both sides face increased pressure to strike a deal that would allow for a House vote.”

THE BIG IDEA: CLIMATE AND THE FINANCIAL SYSTEM — Per a new Center for American Progress paper by Gregg Gelzinis and Graham Steele: “The physical and transition risks associated with climate change threaten financial institutions and markets. Losses to financial firms could be massive and potentially-rapid.”

NEW MISSION FOR FREELAND — Our Andy Blatchford in Ottawa: “Justin Trudeau is tapping his star global diplomat, Chrystia Freeland, to help bridge a divide with what increasingly feels like a foreign country to his Liberal Party: Canada’s restive Western provinces.

“The Canadian prime minister's decision to move Freeland, a familiar face in U.S. and European political and media circles, from her prestigious foreign minister post to the domestic portfolio of intergovernmental affairs came as he rolled out his new Cabinet Wednesday. And it’s a stark illustration of the political challenge facing Trudeau as he prepares to start his second term having lost his majority government in last month's elections.”

Fly Around

SHERMAN, CLEAVER EYE CAP MARKETS CHAIR — Our Zachary Warmbrodt: Democrats on Wednesday elected Rep. Carolyn Maloney to chair the House Oversight Committee, setting up a potential race for her longtime post as the top Democrat on the Financial Services capital markets subcommittee.

Reps. Brad Sherman and Emanuel Cleaver are eyeing the gavel. Sherman said it would be a tough call for him because he's also “very interested” in the Asia subcommittee he currently chairs at House Foreign Affairs, and he’d have to give that up. “If your readers have any input, please contact me with your brilliant ideas,” Sherman said.

GOLDMAN GETS A LITTLE BULLISH — Via Goldman Sachs economists: “We expect the global growth slowdown that began in early 2018 to end soon, in response to easier financial conditions and an end to the trade escalation.”

MOODY’S LESS SO — Per Moody’s report: “The global economy will remain fragile in 2020 after recording the lowest global growth in 2019 since the 2009 recession.”

FORGET THE CW ON THE FED — Per Deutsche Bank’s Torsten Slok, on the idea that the Fed tends to not make moves during presidential election years: “The historical pattern suggests that the Fed doesn’t seem to act differently in years with presidential elections.” Chart.

SENATE DEMOCRATS RIP HUD — Our Katy O'Donnell: “Senate Banking Committee Democrats tore into the Trump administration's Department of Housing and Urban Development on Wednesday, signaling rough votes ahead for the nominations of three top HUD officials.

“A hearing on the nominees — Brian Montgomery to be HUD's deputy secretary and David Woll and John Bobbitt to be assistant secretaries — turned into an attack on a number of controversial policies.”

REPS WANT IMF ANSWERS ON DIGITAL CURRENCIES — Our Zachary Warmbrodt: “Reps. French Hill and Bill Foster are asking the IMF to explain the role it's playing as central banks consider launching their own digital currencies Hill, an Arkansas Republican, and Foster, an Illinois Democrat, wrote to IMF Managing Director Kristalina Georgieva after pressing Federal Chair Jerome Powell for the Fed's views on launching a new digital currency.

“The Fund has become increasingly vocal on the issue. Before taking the helm of the European Central Bank, former IMF Managing Director Christine Lagarde made a case for governments issuing their own digital currency and said it was ‘not science fiction.’”

GLOBAL RISKS DROVE FED — Also via Zach: “Concern about global economic growth convinced Federal Reserve policymakers last month to cut interest rates for a third time this year despite increases in U.S. consumer spending and a strong labor market, according to a meeting summary …

“Federal Open Market Committee members who supported the quarter-point rate cut at the Oct. 29-30 meetings viewed the move as consistent with helping offset weak global growth and trade developments — an insurance policy against those risks and a way to promote a more rapid return to the Fed's 2 percent inflation objectives.”