A mixed US dollar will greet the North American participants today. It is softer against the euro and yen, but firmer against the dollar-bloc currencies. Among the emerging market currencies, the eastern and central European currencies are moving higher in the euro’s draft. The US recognition that North Korea has not escalated the war of words even though it just announced new sanctions on 10 Russian and Chinese companies and half dozen individuals were aiding it; the Korean won posted its third consecutive advancing sessions.

Asian equities advanced with the MSCI Asia Pacific Index also posting small gains for each day this week and seven of the past eight days.  Some of the markets that are open late struggled and European equities are mostly lower. The Dow Jones Stoxx 600 is off 0.2%. Financials and materials are bucking the drag from the other sectors, led by consumer discretionary and utility sectors. It is the fourth losing session in the past five. Sovereign 10-year benchmark yields are mostly firmer, with Italy and Portugal seeing yields rise five-six basis points.  

Although a key controversial adviser to President Trump was dismissed last week, the opportunity to re-start may be closing. Last night, Trump made two unsettling remarks. First, he suggested that he may be willing to accept a shut down of the government if that is what is necessary to get Congress to authorize funding for the controversial wall on the border with Mexico. The spending authorization is needed by the end of September as the US begins a new fiscal year. Government shutdowns are not unprecedented in the US, of course, and they typically are mildly disruptive. They are not good for investment climate.   

Congress may seek to link the spending authorization bills with the debt ceiling. The failure to renew the spending authorization leads to a government shutdown, but failure to lift the debt ceiling impairs the ability to service the debt. While political maneuvering can lead to a shutdown, missing a debt payment is considerably more serious and one that in this game of brinkmanship largely within the Republican Party neither side seems to want to risk.  

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