Rising Geopolitical Tension With North Korea, Increased U.S. Sanctions Pressures Stocks

U.S. stocks are heading for a lower open on Friday as investors react to increasing geopolitical tension between North Korea and the U.S. following a comment from North Korea’s foreign minister on Thursday about North Korea testing a hydrogen bomb in the Pacific Ocean and a decision by the Trump administration to issue an executive order on North Korea targeting individuals and entities that engage in trade with North Korea and financial institutions that facilitate this trade.

The executive order authorizes the Secretary of the Treasury in consultation with the Secretary of State to impose sanctions on persons involved in the construction, energy, financial services, fishing, information technology, manufacturing, medical, mining, textiles, or transportation industries in North Korea.

The sanctions also impacts ports with ownership, control, or operation of any port in North Korea, including any seaport, airport, or land port of entry. The sanctions targets North Korea’s shipping and trade networks and slaps a 180 day ban on vessels and aircraft that have visited North Korea from visiting the United States.

Import/exports are included in the sanctions with at least one significant importation from or exportation to North Korea of any goods, services, or technology.

The sanctions gives the Secretary of the Treasury some added authority to block any funds originating from, destined for, or passing through accounts linked to North Korea that come within the United States or possession of a U.S. person.

IHS Markit Flash PMI

Later today U.S. September Flash PMI is due from IHS Markit.

Earlier today Eurozone September Flash PMI from IHS Markit showed that the Eurozone closed the 3rd quarter on a strong note with growth of business activity picking up to its highest level since May, and registering one of the strongest gains over the past 6 years.

Flash Eurozone Manufacturing PMI was 58.2 in September, reaching a 79 month high, after recording 57.4 in August.

Chris Williamson, Chief Business Economist at IHS Markit said the strong survey data points to accelerating momentum heading into the end of the year but noted the rise in business activity and price pressure could cause the ECB to pull back some of its stimulus and asset purchases in 2018.

“The survey data point to 0.7 percent GDP growth for the third quarter, with accelerating momentum boding well for a buoyant end to the year” Williamson said in a statement.

“The stronger euro was cited as a concern among manufacturers, but as yet appears to have had only a modest impact on exports. Manufacturing in fact remains a major driver of the current upturn, with export sales playing an important role in pushing order books higher and encouraging further investment in capacity expansion” Williamson added.

Impact On ECB Stimulus 

“The rise in business activity and accompanying build-up of price pressures will fuel expectations that the ECB is poised to announce its intention to rein back some of its stimulus, reducing its asset purchases in 2018” Williamson said.

During the ECB’s last policy meeting, ECB President Marion Draghi said in a press conference that a decision about the ECB’s stimulus plans will likely be made at their next policy meeting in October.

Written and Edited By:

John Schweitzer





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