Turkey Shoots Down Russian Plane, US Issues Worldwide Travel Alert
Here’s what I talked about yesterday, on BNN Business Day PM at 3:30PM ET. Everything changes with the downing of the Russian plane by Turkey as it jacks uncertainty over the Middle East, potential Russian retaliation, and on-going concerns over-all about flying as US issues a world-wide travel alert. Remember, Turkey is a NATO member. Russia has stopped all flights to Turkey at this moment and clearly this will negatively impact any travel to region (Southern Europe as well? Mediterranean?) for leisure activities.
1. Europe: The attacks in Paris and raids throughout Europe are going to have a depressing effect on the European economy. Anything associated with travel, hotels, leisure, football games, transportation all will be negatively impacted.
Even before this week’s Russian jet situation, here’s what Belgium authorities were telling people (From Sunday AP):
Heavily armed police and soldiers were patrolled Saturday morning at key intersections of the Belgian capital, a city of more than 1 million that is home to the headquarters of the European Union, the NATO alliance and offices of many multinational corporations.
Residents were recommended to avoid gatherings, train stations, airports and commercial districts. Service was halted on the Brussels Metro, as well as on streetcar lines that run underground.
The prime minister, speaking at a news conference after the emergency government meeting, said,
“We urge the public not to give in to panic, to stay calm. We have taken the measures that are necessary.”
The US issued a worldwide travel alert saying terrorists may continue to plan attacks in multiple regions.
The key question is this: how many more attacks are coming? Similar to 9/11, the unknowns and reactions to the unknowns will drive values. I think the markets are too sanguine about this threat and its impact to the European economy. The good news is that this guarantees action by the ECB to expand their QE in December. This means the EUR will continue to lose ground against the US dollar and other major currencies.
2. US: The attacks in Paris have changed the nature of the US 2016 Presidential race. A new poll for New Hampshire, the 2nd Republican primary, shows a dramatic shift in voters attitudes: 42 percent of likely voters calling terrorism and national security the country’s most important issues. Before Paris, they’d worried most about the economy. First, this hurts Democrats as their leader, President Obama, said before the Paris attacks that the Islamic State was “contained.” Second, Republicans are aided as many candidates are calling for a stoppage or slow-down of the Obama administration’s desire to bring 10,000 Syrian refugees into the United States. As an example of the change, the latest polling on the Republican Iowa primary shows Senator Ted Cruz rising to 2nd place.
3. Commodities: The stronger US dollar is putting downward pressure on many commodities as most are priced in US dollars. Oil doesn’t seem to be able to maintain rallies despite news of declining US rig counts and Saudi Oil Minister Ali al-Maimi saying on last Thursday the kingdom is working with members of OPEC and countries outside of the group to see a stable oil market. For agriculture, prices may face more downward pressure as the new president of Argentina may unleash an estimated $8 billion in shipments of stored crops. Bloomberg: Argentinian farmers are hoarding as many as 22 million tons of the commodity, about one-third of last season’s record crop, according to Miguel Bein, the main economic adviser to presidential candidate Daniel Scioli, who conceded to Macri on Sunday following a runoff vote between the two. Like Europe, Canada gets hurt with the stronger US dollar, lower commodity and energy prices. Still looking to hear/see Trudeau come forward with strategic vision and plan to deal with major economic problems. Bank of Canada to the rescue?
Originally posted on Andrew Busch’s website.