By Geoffrey Smith and Ana Beatriz Bartolo
Investing.com – The US completes withdrawal of troops from Afghanistan. International travel is getting tougher as Covid-19 shows its ugly head again. Zoom Video falls after forecasting slower growth, while China’s economy slowed dramatically in August due to blockages related to the spread of the coronavirus.
Here’s what you need to know about the financial markets on Tuesday, August 31st.
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1. US completes withdrawal from Afghanistan and restriction on transatlantic travel
The US completed its military withdrawal from Afghanistan 20 years after the invasion of the Asian country, the longest war in American history.
Although a semblance of order was restored to the final days of withdrawal, the initially chaotic scenes unleashed by the Taliban’s rapid takeover of the country undermined the president’s international and domestic standing, and led to celebration by official Chinese and Russian commentators on perception the lack of value of US security guarantees.
The turmoil, however, has not yet resulted in any clear impact on global markets. In particular, the market continued to be guided by monetary policy expectations. Even against alternative currencies such as the US Dollar, the Dollar has risen in the last month.
Also in international relations, the US and the European Union (EU) have mutually restricted travel, in response to the growing numbers of Covid-19 on both sides of the Atlantic. The EU has issued guidelines to member states that only fully vaccinated people should be allowed to travel freely to Europe. The guideline is non-binding as member states retain sovereignty over public health measures.
The US, meanwhile, has increased the arrival alert status of Germany and Switzerland (as well as Canada), reflecting the growing number of cases. The moves weighed on European-flag airlines at the start of European trading: IAG (LON:), which owns Iberia, Vueling and British Airways (outside the EU), fell 3.0% to test a one-month low, while German Lufthansa (DE:) fell 1.1%.
CHECK: Quotation of the main global indices
2. Acts of September 7 and entrepreneurs’ manifesto
The pocketbook acts scheduled for September 7 bring the expectation to know what the real support the president has from the population. Isolated by an institutional crisis that he himself caused, Bolsonaro also loses support from the political and business class and several polls show his defeat for former president Lula in the next elections.
In recent weeks, Bolsonaro has been rehearsing demonstrations of power, such as the military parade in Brasília, but the result has not reached the desired audience. To keep the remaining supporters, Bolsonaro must continue to ignite attacks against other institutions, especially the Supreme Court (STF), according to a report by Eurasia.
Yesterday, the Federation of Industries of the State of São Paulo (Fiesp) postponed the release of a manifesto demanding pacification and harmony in the relationship between the three powers, an individual initiative of the president of the institution Paulo Skaf. The newspaper Economic value informs that the postponement caused discomfort in part of the 200 business entities that signed the manifesto. Newspapers inform that the suspension of disclosure occurred after a request by the president of the Chamber Arthur Lira (PP-AL) to Skaf.
The manifesto is surrounded by controversy, especially between the Brazilian Federation of Banks (Febraban) and Economy Minister Paulo Guedes, who accused the bank’s organization of pressing for a more critical content of the government and its economic policy in the content of the letter. Febraban denies it.
In the end, the Abag (Brazilian Agribusiness Association) ended up releasing its manifesto demanding a “pacification between the powers of the Republic”.
CHECK: Brazilian stock quote
3. NY futures trade mixed; Zoom under pressure
US equities are likely to open mixed later, still backed by hopes of a late and soft start to easing monetary stimulus.
At around 8:33 am, es fell by 0.07% and 0.02%, respectively, while there was a slight increase of 0.03%. The , an index fund that measures the performance of Brazilian stocks in New York, was up 0.52% in the pre-market. The index underperformed on Monday as the reopening of trading suffered again due to the Covid-19-related news flow.
Actions that will likely be in focus later include the Zoom Video Communications (NASDAQ:) (SA:), which fell 12% in trading after the market closed on Monday after forecasting a slowdown in revenue growth from last year. Revenue grew “only” 54% year over year in the second quarter. Also in the spotlight will be Chinese gaming company NetEase (NASDAQ:) (SA:), which reported better-than-expected numbers to smooth over the many blows it has received from regulators in recent weeks. The cybersecurity expert leads a very short balance sheet after closing.
CHECK: US stock quote in the pre-market
4. The Chinese economy slows down; mixed european data
The extent of the slowdown in the Chinese economy under pressure from the latest Covid-19 wave was apparent in the country’s official purchasing managers’ indices for August. The decelerated to 50.1, just above the line separating growth from contraction. The currency, however, plunged into contractionary territory at 47.5, its lowest reading since February 2020.
There was also evidence of a slowdown in parts of Europe: the French fell 2.2% in July, while the French collapsed after a home-buying tax holiday ended.
On more positive developments, the number of in Germany fell more sharply than expected in August, at 53,000.
5. WTI oil does not exceed US$70 after hurricane Ida
Crude oil prices again struggled at the $70-a-barrel mark as the aftermath of Hurricane Ida revealed no lasting damage to production capacity in the Gulf of Mexico. Futures prices were also relatively calm, despite the prospect of a slow return to full production at refineries with just under 2 million barrels per day of capacity.
Ida effects can complicate the task of interpreting weekly data from the American Petroleum Institute at 5:30 pm.
CHECK: Quotation of the main global commodities
At 8:42 am, futures contracts were down 0.87% to $68.61 a barrel, while futures fell 0.75% to $71.70 a barrel.