Fed trumps Trump as dollar, US Treasury yields soar

LONDON - The dollar and U.S. Treasury yields jumped on Wednesday, while stocks were mixed, as investors focused less on U.S. President Donald Trump's first speech to Congress and more on what they see as a growing chance of a U.S. interest rate hike this month.

Trump took a measured tone in his keenly awaited speech on Tuesday, saying he was open to immigration reform, but failing again to provide much detail on his plans for tax reform and infrastructure spending.

For markets, the speech was overshadowed by comments from a handful of Federal Reserve policymakers, who suggested rate-setters are worried about waiting too long to raise interest rates in the face of pending economic stimulus from Washington.

New York Fed President William Dudley -- one of the most influential U.S. central bankers, and usually considered a dove -- said the case for tightening monetary policy had become "a lot more compelling", while San Francisco Fed President John Williams said he saw "no need to delay" raising rates.

Having priced in only around a 30 percent chance that the Fed would move this month before the Fed comments, investors moved to price in around a 68 percent probability of a March hike, according to Reuters data. By June, an 84 percent chance of at least one hike has now been priced in.

The dollar index, which measures the greenback against a basket of other major currencies, climbed as much as 0.7 percent to its highest levels in seven weeks, having also been helped by data showing robust U.S. consumer spending.

Two-year U.S. Treasury yields jumped to 1.304 percent, the highest since December, to match their highest levels since 2009. The gap between them and their German equivalents increased to its widest since 2000.

"After dominating the markets since November, President Trump could now fade into the background as the focus shifts to the Fed and the prospect of rate increases," said Kathleen Brooks, Research Director at City Index in London.

"Fed members don't just let words slip out when they speak to the press - this was a message for the markets, and the markets have duly reacted."

SHORT ON DETAIL

European shares gained, with basic resources the top-performers on Trump's promise of $1 trillion of infrastructure spending.

The pan-European STOXX 600 index rose 1 percent, with Germany's DAX and France's CAC 40 outperforming peers to climb 1.3 percent and 1.4 percent respectively, helped by strong company earnings reports.

The global MSCI ACWI index, which has risen more than 10 percent since Trump's election in November, was flat, with gains in Europe offsetting earlier falls on Asian and U.S. bourses. The MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.2 percent.

Trump pledged to overhaul the immigration system, improve jobs and wages for Americans and deliver "massive" tax relief to the middle class and tax cuts for companies, but offered few clues on how they would be achieved.

"The market has been looking for reassurance that Trump intends to follow through on his campaign promises for fiscal spending, tax cuts and deregulation," said James Woods, global investment analyst at Rivkin in Sydney.

"He mentioned these policies but did not provide any actual details or time lines, which is what investors are looking for."

U.S. stock futures still pointed to a higher open after Trump's address. E-mini S&P futures ES1 rose 0.5 percent, after the Dow Jones Industrial Average snapped a 12-day winning streak to close down 0.1 percent in the prior session.

A raft of surveys pointing to stronger factory activity in China, Japan and other parts of Asia were largely overshadowed by Trump's speech.

In commodity markets, crude oil prices lost more ground, with rising U.S. oil output adding pressure on the market, although OPEC production cuts continued to offer support.

The stronger dollar weighed on gold, which dropped 0.3 percent to 1,244.36 an ounce, extending Tuesday's decline.

source: news.abs-cbn.com

Trump's post-Orlando message falls flat with Republican establishment

WASHINGTON/NEW YORK - The mass shooting in Orlando, Florida has allowed Donald Trump to seize upon a familiar issue he has used to great advantage -the threat of Islamist militants and his plan to limit Muslim immigration to the United States, offering him what could be a crucial moment to re-boot his sputtering presidential campaign.

But while rank-and-file voters might respond positively to Trump's renewed call for a ban on some Muslims entering the country, his reaction to the massacre showed few initial signs of winning over Republican foreign-policy figures who have spurned the New York mogul.

"It's a missed opportunity to present a different image," said Peter Feaver, a top National Security Council aide in the George W. Bush White House. "He has doubled down on policies I oppose and that aren't going to solve the problem."

Trump said in a speech Monday in New Hampshire he would suspend immigration from countries "where there is a proven history of terrorism" against the United States. He said radical Muslim immigrants were "trying to take over our children and convince them how wonderful ISIS (Islamic State) is."

After the worst mass murder in modern U.S. history on Sunday left 50 dead, Trump's speech was hastily refashioned from a broad critique of Democratic rival Hillary Clinton to a dire warning of the threat from Islamist militants.

Although Islamic State has claimed responsibility for the attack, U.S. officials have maintained that Omar Mateen's motives were unclear and that he had no known direct links with the Syria-based group. Mateen, they said, was likely radicalized over the Internet.

A week ago, the presumptive Republican presidential nominee's bid was taking on water. He was being battered by fellow Republicans for his comments about the Hispanic heritage of a federal judge, and Clinton was pulling away in the polls.

A renewed focus on national security could provide Trump with the chance to expand his appeal both to undecided voters and to the Republican foreign-policy establishment.

While Trump at times seems to relish being at odds with the establishment, the unhappiness among the party's hawks isn't just a matter of hand-wringing. It means if Trump does reach the White House, he could have a difficult time recruiting talented, experienced advisers.

ALARMING THE MAINSTREAM

Max Boot, an influential conservative at the Council on Foreign Relations, said the Orlando tragedy "could have provided an opening for Trump to rally Republicans against terrorism." But instead, Boot said, Trump has been "partisan and petty."

Boot criticized Trump for suggesting on Monday that President Barack Obama may sympathize with radicalized Muslims and for reviving the proposed Muslim ban. "His performance has been in character," Boot said, "which is to say appalling."

Trump has alarmed some mainstream Republicans with vows to shred international trade deals, his demands that Mexico pay for a border wall and his questioning of U.S. foreign policy pillars such as its security commitments to NATO and Asian allies.

Clinton struck a very different tone in a speech on Monday, urging "statesmanship, not partisanship" and "clear, rational discussion" on how to protect the United States from terrorist threats.

Eliot Cohen, a top-ranking State Department official during the Bush administration, called Trump's reaction to the shootings "opportunistic and shallow" and "not what Americans expect from a president."

Lanhee Chen, a top aide to Mitt Romney during his 2012 presidential campaign, suggested Trump will not be able to refine his image. "While it would be true in most cases a big speech like this could reset the decks, I think the challenge with Donald Trump is always who he is at his core," Chen said.

But voters are another matter. Trump's swift rise within the Republican Party was at least partly due to the strident tone he has taken toward immigrants and refugees.

When Trump responded to last year's terror attacks in Paris and California with a call for banning Muslims from entering the country, he surged in the Reuters/Ipsos poll in the weeks that followed, opening up a 30-point lead over his Republican primary rivals.

Republicans continue to be strongly supportive of Trump's approach to handling terrorism. This month, two-thirds of Republicans said they agreed with Trump's proposal to temporarily ban Muslims from entering the country.

Overall, 42 percent of Americans said they agreed with a Muslim ban while 50 percent said they disagreed, with another 8 percent not sure, according to another Reuters/Ipsos poll from May 17 to June 6. The poll of more than 6,000 people has a credibility interval, a measure of accuracy, of about 1.5 percentage points.

Combating Islamist extremism was on the mind of Texas billionaire Doug Deason, a major Republican donor who told Reuters he will meet with Trump later in the week to discuss his support.

Nothing Trump has said since the Orlando shooting has caused him to re-think backing him, Deason said.

Peter King, a U.S. congressman from New York, said his party's foreign-policy establishment will eventually have to get on board with Trump.

"As one of the two major candidates for president, he will have to get advice or consultation with top national-security people," King said.

source: www.abs-cbnnews.com