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Politics weigh on Europe as the US and UK return to trading

Stock markets around the world are mixed today as the US and UK return to trading. US index futures are down slightly while indices in Europe are trading lower with The FTSE and CAC down 0.4% and the Dax down 0.1%.

Gold and the Japanese Yen are consolidating recent gains at higher levels as political risk continues to rise. President Trump returns from his overseas trip to continuing domestic turmoil.

 In Europe, Greece is back in the headlines with the country's creditors moving the goal posts on what is needed to unlock bailout funds ahead of July debt repayments. Meanwhile, signs of a political unrest have grown in recent weeks amid multiple national strikes, regular police who haven't been paid facing off against riot police, and medical equipment being stolen from hospitals because there isn't enough money to pay for security just to name a few examples. ‎

It’s one thing to ask governments to act responsibly and stay on top of their debts and another to unleash a multi-year depression, create extensive human suffering and put a nation in chains to order to meet uncertain standards. Greece could be ripe for a revolution this summer and nobody seems to be paying attention with the EU wanting to paper over the problems until next summer. 

Meanwhile in Italy, where an election needs to be held by May 2018, calls for an early election are growing to clear the air with concerns growing the country' s fragile banking system could come under pressure again after the German election. 

Crude oil is down 0.4% for WTI this morning on limited news but natural gas has been hammered for a 3.6% loss. 

The US dollar and Fed speculation may ramp up today, as the June 14 decision on whether to raise interest rates again looms. Overnight St. Louis Fed President Bullard indicated the jury remains out on whether the Trump Administration can meet high market expectations. Dallas Fed President Kaplan, a voter this year, indicated earlier today he still expects two more rate hikes this year. With the budget battle likely to derail September, this suggests June remains likely. This morning Core PCE inflation is out, a measure the Fed uses.

Comments from‎ Fed Governor Brainard may also attract significant attention. She is one of the most dovish members of the Fed. Her comments may indicate whether the doves have thrown in the towel and accepted a potential June rate hike or if they are planning to take a stand.

In stocks today, Kinder Morgan could attract attention as a deal between the Green Party and the NDP to form a coalition government puts the company’s Trans Mountain expansion project in jeopardy. Kinder Morgan is trying to complete an IPO of its Canadian business. A steep jump in political/regulatory risk means investors could demand a much lower price and could cause the offering to fail. In other news, Bank of Nova Scotia wraps up bank earnings season with a very strong report. 

Corporate News

Bank of Nova Scotia        $1.62 vs street $1.56

Economic News

Significant announcements released overnight include:

France GDP            1.0% vs street 0.8%

Japan retail sales        3.2% vs street 2.3%

Upcoming significant economic announcements include:

1:00 pm BST        Germany consumer prices        street 1.6% vs previous 2.0%

8:30 am EDT        US personal income             street 0.4%
8:30 am EDT        US personal spending            street 0.4%
8:30 am EDT        US core PCE inflation            street 1.5%

8:30 am EDT        Canada industrial prices            previous 0.8%
8:30 am EDT        Canada raw material prices        previous (1.6%) 

10:00 am EDT        US consumer confidence        street 119.5

1:00 pm EDT        FOMC Brainard speaking

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