U.S. Stock Futures Point To Lower Open; Recap Of Draghi Speech From Jackson Hole

ECB President Mario Draghi

U.S. stock index futures are set for a lower open on Monday in the wake of Tropical Storm Harvey in Texas that has led to catastrophic flooding in Houston with flash flooding emergencies remaining in effect and many areas around the city receiving over 2 feet of rain, according to the national weather service.

The temporary closure of oil refineries across the region due to the storm includes Exxon-Mobil operated Baytown Refinery, the 2nd largest in the U.S. and the 9th largest in the world in addition to the Saudi Aramco operated Port Arthur Refinery, the largest in the U.S. and the 8th largest in the world.

After spiking on Saturday, WTI crude oil futures are lower (-0.84 percent) at $ 47.47 a barrel for October 2017 futures as of 4:20 EST.

Investors were left with little concrete data to takeaway from the Jackson Hole Symposium late last week in Jackson Hole, Wyoming regarding monetary policy except for Fed Chairwoman outlined in a keynote speech the past efforts that were undertaken to adopt financial reform measures during the U.S. economic downturn from 2007-2012.

ECB President Marion Draghi gave a speech late on Friday titled, “Sustaining Openness In A Dynamic Global Economy” that focused on creating greater global economic openness and movement away from protectionism which threatens global growth.

Draghi said that a move towards protectionism “would pose a serious risk for continued productivity growth and potential growth in the global economy” and mentioned the risks are even more acute in advanced economies that are facing structural challenges related to old age dependencies rising.

Countries like Japan and several low birth rate countries of Europe are confronting a demographic shift with growing older populations.

The U.S. is also facing a greying “baby boom generation” that is rapidly facing old age and will require a higher level of medical coverage during the years ahead.

“Old-age dependency ratios are rising, putting more pressure on public finances. By 2025 there will be 35 people aged 65 and over for every 100 persons of working age in OECD countries, compared with 14 in 1950” Draghi said.

Draghi explained that public debt levels in the advanced economies of the OECD have jumped 31 percent over the past decade.

“At the same time, public debt levels have surged in those countries from 56 percent of GDP in 2007 to around 87 percent today. Only higher potential growth can provide a lasting solution” Draghi added.

Draghi emphasized the need for fairness, including the need to remove barriers of free trade such as currency manipulation, dumping, and lack of reciprocity concerning market access.

Admitting that organizations such as the World Trade Organization (WTO) remains vital to ensuring that global trade is perceived as fair and safe and avoiding protectionism in disguise, Darghi also pointed out that other international bodies such as the G20 and OECD which fosters global cooperation are “necessary to reconcile openness with equity.”

“The OECD/G20 initiative to combat tax base erosion and profit-shifting is just one example of such cooperation” Draghi said in his speech.

Draghi emphasized the need for more attention with cross border finance in the 19 member euro area and said that organizations such as the Financial Stability Board and the Basel committees which facilitate convergence in terms of regulation and supervision are critical.

Draghi said that openness to trade is “under threat” and policies aimed at “answering this backlash are a vital part of the policy mix.”

He repeated in his closing statement the need to raise potential output growth and lift productivity growth in countries with aging societies through more openness to trade.

U.S. Economic Calendar

This week investors will be paying close attention to the U.S. jobs report for August from ADP on Wednesday with the private sector and the closely watched non-farm payroll report due on Friday from the U.S. Bureau of Labor Statistics.

In July the U.S. economy added 209,000 non-farm payroll jobs. Over the past 3 months, job gains have averaged 195,000 per month.

Some of the other economic data that will be reported this week includes Consumer Confidence for August due on Tuesday, the 2nd estimate of Q2 GDP on Wednesday, personal income & outlays for July due on Thursday, and the Manufacturing ISM report on business released on Friday alongside vehicular sales for August.

Written and Edited By:

Johnathan Schweitzer





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