By Joyce Yu
Philadelphia, PA–Geopolitical events, money issues and economic growth top the list of risks to global markets. Wall Street equities opened lower awaiting clear signals.
Wall Street dipped Wednesday after US President Donald Trump commented on the possibility of a government shutdown. The Dow Jones industrial average and S&P 500 dropped by 0.4% and 0.35% respectively while the Nasdaq slipped 0.3%.
Markets were under pressure with intensified risks of the U.S. breaching its debt ceiling. The US had to raise the U.S. debt ceiling by late-September or risk defaulting on debt payments.
“Investors would remain highly sensitive to any new headlines around the U.S. government shut down due to the debt ceiling hitting its boundary,” said Naeem Aslam, chief market analyst at Think Markets UK, to CNN.
Fitch Ratings said on Wednesday the institution would review the United States’ sovereign rating if the country fails to raise the debt ceiling soon with “potentially negative implications.
In a research note published this week, Karthik Sankaran, New York-based director of global strategy at Eurasia, wrote, “For much of the post-crisis period, U.S. money, Chinese growth, and European politics have mattered most” to investors. “But developments over the past year suggest that markets should be paying attention to U.S. politics, European growth, and Chinese money.”
These days, it’s a fractious White House fomenting global political risk that for a decade had emanated from Europe, according to Sankaran. China is no longer the world’s growth driver as it grapples with a bad-debt situation that’s erupted in the decade since the U.S. righted its own banks after they collapsed under the weight of consumer loan defaults, according to a Bloomberg report.
Euro-zone growth, while has limited contribution to global expansion, is still an “unanticipated positive surprise for the global economy,” Sankaran said.
Eurasia further pointed out that U.S.-related political risks continue to remain at center stage. The dollar has the worst performance this year among 16 major peers, according to data compiled by Bloomberg.
“Further erosion of President Donald Trump’s domestic policy coherence, as well as concern over his unpredictability in international affairs will continue to weigh on the dollar versus developed market safe-haven currencies,” Sankaran noted.
Annual meeting of the central bankers remains in focus despite that expectation for meaningful comments from the key speakers including the Federal Reserve Chair Yellen and European Central Bank President Mario Draghi is fairly low.
Separately, the number of Americans filing for unemployment benefits was less than estimated last week and near a four-decade low, Labor Department data showed Thursday, indicating the job market remains robust.
