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Globe and Mail
25 minutes ago
- Globe and Mail
Markets struggle to price smoke and mirrors
Just when financial markets appeared to be normalizing after this spring's tariff shocks, they've been sent another curve ball that will be fiendishly hard to price. Following news of huge downward revisions to U.S. May and June payrolls, President Donald Trump instantly fired the Bureau of Labor Statistics boss Erika McEntarfer, accusing her of 'rigged' data designed to make him look bad. Few doubt that the BLS has had long-term data collection issues that often result in big revisions that make timely policymaking difficult. But few have ever suggested they are politically biased. What Ms. McEntarfer's dismissal now introduces is not only distrust of future jobs numbers, but it may also call into question the figures released by any government statistics bodies who may fear similar accusations and retribution if they issue data unfavorable to the administration. Tarnishing what many investors previously considered the gold standard for transparency and institutional integrity will force markets toFenta re-consider questions about the U.S. from earlier in the year, ones that undermined the dollar, lifted risk premiums and scrambled traditional asset market trading patterns. There was a taste of that on Friday, with stocks, bond yields and the dollar all falling in tandem in a flurry of activity compounded by the payrolls revisions themselves, Mr. Trump's reaction to them and the early resignation of Federal Reserve Board Governor Adriana Kugler. There was no follow through, however. Monday saw much of these moves pared back as U.S. markets puzzled over how to price this rare threat of statistical bias, with murmurs of political influence in key data something investors have often reserved for China and other emerging economies. Short sellers appeared to hold fire, perhaps chastened by the sharp bounceback in U.S. stock markets from their April lows during the turbulent second quarter. Multiple other issues are also in play at the same time of course - most notably the performance of tech companies, the AI boom and a fairly healthy wider earnings season. In the rates market, the factors at play are different, but the moves since Friday also seem logical. If the weaker payroll data, trusted or not, shifts the dial sufficiently for the Fed to ease policy, then the sudden return of a fully priced-in September rate cut may well be justified - especially now that there will be one more Trump appointee on the board this year to boot. One might imagine that a Fed long familiar with big payrolls revisions will look at more than the raw tallies to assess the labor market. If they do, they'll still see a historically low unemployment rate and super resilient weekly jobless claims. That said, if the White House still succeeds in its demand for politically favorable data and steep interest rate cuts, then that could well mean that the economy will be running quite hot, which could be read by some as a boon for stocks that riff off high nominal GDP growth projections. Whether that's really just smoke and mirrors is the big question. The calculus for Treasuries and the dollar is much different. Rekindled Fed easing prospects after the payrolls and Kugler news clearly dragged short-term Treasury yields lower. The 2-30 year yield curve briefly hit its steepest in more than two years, and the snoozing Treasury volatility gauge, which had slipped to its lowest level in more than three years, experienced a sharp spike. The so-called Treasury 'term premia,' which had dissipated through July, will be watched closely now. 'Possible distrust of economic data could raise uncertainty for which investors may demand more yield compensation,' wrote Morgan Stanley's Matthew Hornbach and team on Friday. 'If the Fed cuts its policy rate in the coming quarters - whether or not investors think the economic data call for such cuts - the expectation of eventual reflation should put upward pressure on term premiums - helping the Treasury curve steepen further.' 'The less investors believe the data demand rate cuts, the more the curve should steepen ... if the Fed delivers the cuts anyway,' they added. Meanwhile, the dollar's performance is likely to hinge both on those risk premiums and on whether overseas investors continue to fret about being over-exposed to expensive U.S. assets. The dollar's bounce through the back end of July was defused on Friday, with the previously ultra short-dollar positioning now appearing to be back in better balance. Both rising speculation about politically driven rate cuts and higher risk premia may now tilt the balance toward another downleg for the dollar. 'McEntarfer's firing will further call into question the integrity of US economic data,' reckons Tim Duy at SGH Macro Advisors. 'The risk going forward is the data will in fact be 'rigged' in favor of rapid job growth and low inflation, which will clearly exacerbate market volatility.' Markets may be hesitant in moving to price all of this - but like so much else this year, the damage may be a slow burn rather than a big bang. Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.
CTV News
an hour ago
- CTV News
Trump threatens to ‘substantially' raise tariffs on Indian goods as it continues to buy Russian oil
Oil tanker trucks are pictured outside an oil refinery operated by Bharat Petroleum Corp. Ltd., in Mumbai, India, on April 4, 2025. (Dhiraj Singh/Bloomberg/Getty Images via CNN Newsource) U.S. President Donald Trump said on Monday that he will 'substantially' raise tariffs on India because it's still buying Russian oil. 'India is not only buying massive amounts of Russian Oil, they are then, for much of the Oil purchased, selling it on the Open Market for big profits,' the president posted on his social media network, Truth Social. 'Because of this, I will be substantially raising the Tariff paid by India to the USA.' But India pushed back, saying it is being unfairly targeted by the United States and European Union for importing oil from Russia. Tariffs are taxes directly paid by importers, though countries exporting goods could indirectly get harmed, as higher prices tend to drive demand down, leading countries to buy more from other countries with lower tariffs or to increase domestic production. Last week, Trump threatened a minimum 25 per cent tariff on goods coming from India, set to take effect at the end of this week. Indian goods are currently subject to a 10 per cent minimum rate. Trump did not specify what new tariff rate goods from India could be charged if it continues to purchase Russian oil. The Indian Ministry of External Affairs said the country began importing from Russia because traditional supplies were diverted to Europe after the start of Russia's war on Ukraine. 'India's imports are meant to ensure predictable and affordable energy costs to the Indian consumer. They are a necessity compelled by (the) global market situation,' a statement posted on social media from the ministry's spokesperson Randhir Jaiswal read. India said both the U.S. and the EU were also 'indulging in trade with Russia.' 'In this background, the targeting of India is unjustified and unreasonable. Like any major economy, India will take all necessary measures to safeguard its national interests and economic security,' the statement said. The Kremlin has also denounced the U.S. plan to raise tariffs on Indian imports. 'We hear many statements that are in fact threats, attempts to force countries to stop their trade relations with Russia,' Kremlin spokesman Dmitry Peskov told reporters Tuesday. 'We do not consider such statements legal. We believe that sovereign countries should have – and do have – the right to choose their own trading partners.' Trump's tariff threat comes as he's upped the pressure on Russia's Vladimir Putin to reach a ceasefire with Ukraine within days, shortening his prior deadline. By Elisabeth Buchwald, Michael Rios, CNN Anna Chernova contributed reporting.
CTV News
an hour ago
- CTV News
In rejecting U.S. jobs report, Trump follows his own playbook of discrediting unfavourable data
WASHINGTON — When the coronavirus surged during U.S. President Donald Trump's first term, he called for a simple fix: Limit the amount of testing so the deadly outbreak looked less severe. When he lost the 2020 election, he had a ready-made reason: The vote count was fraudulent. And on Friday, when the July jobs report revisions showed a distressed U.S. economy, Trump had an answer: He fired the official in charge of the data and called the report of a sharp slowdown in hiring 'phony.' Trump has a go-to playbook if the numbers reveal uncomfortable realities, and that's to discredit or conceal the figures and to attack the messenger — all of which can hurt the president's efforts to convince the world that America is getting stronger. 'Our democratic system and the strength of our private economy depend on the honest flow of information about our economy, our government and our society,' said Douglas Elmendorf, a Harvard University professor who was formerly director of the Congressional Budget Office. 'The Trump administration is trying to suppress honest analysis.' The president's strategy carries significant risks for his own administration and a broader economy that depends on politics-free data. His denouncements threaten to lower trust in government and erode public accountability, and any manipulation of federal data could result in policy choices made on faulty numbers, causing larger problems for both the president and the country. The White House disputes any claims that Trump wants to hide numbers that undermine his preferred narratives. It emphasized that Goldman Sachs found that the two-month revisions on the jobs report were the largest since 1968, outside of a recession, and that should be a source of concern regarding the integrity of the data. Trump's aides say their fundamental focus is ensuring that any data gives an accurate view of reality. Not the first time Trump has sought to play with numbers Trump has a long history of dismissing data when it reflects poorly on him and extolling or even fabricating more favorable numbers, a pattern that includes his net worth, his family business, election results and government figures: — Judge Arthur Engoron ruled in a lawsuit brought by the state of New York that Trump and his company deceived banks, insurers and others by massively overvaluing his assets and exaggerating his net worth on paperwork used in making deals and securing loans. — Trump has claimed that the 2016 and 2020 presidential elections were each rigged. Trump won the 2016 presidential election by clinching the Electoral College, but he lost the popular vote to Hillary Clinton, a sore spot that led him to falsely claim that millions of immigrants living in the country illegally had cast ballots. He lost the 2020 election to Joe Biden but falsely claimed he had won it, despite multiple lawsuits failing to prove his case. — In 2019, as Hurricane Dorian neared the East Coast, Trump warned Alabama that the storm was coming its way. Forecasters pushed back, saying Alabama was not at risk. Trump later displayed a map in the Oval Office that had been altered with a black Sharpie — his signature pen — to include Alabama in the potential path of the storm. — Trump's administration has stopped posting reports on climate change, canceled studies on vaccine access and removed data on gender identity from government sites. — As pandemic deaths mounted, Trump suggested that there should be less testing. 'When you do testing to that extent, you're going to find more people,' Trump said at a June 2020 rally in Oklahoma. 'You're going to find more cases. So I said to my people, 'Slow the testing down, please.'' While Trump's actions have drawn outcry from economists, scientists and public interest groups, Elmendorf noted that Trump's actions regarding economic data could be tempered by Congress, which could put limits on Trump by whom he chooses to lead federal agencies, for example. 'Outside observers can only do so much,' Elmendorf said. 'The power to push back against the president rests with the Congress. They have not exercised that power, but they could.' White House says having its own people in place will make data 'more reliable' Kevin Hassett, director of the White House National Economic Council, took aim at the size of the downward revisions in the jobs report (a combined 258,000 reduction in May and June) to suggest that the report had credibility issues. He said Trump is focused on getting dependable numbers, despite the president linking the issue to politics by claiming the revisions were meant to make Republicans look bad. 'The president wants his own people there so that when we see the numbers, they're more transparent and more reliable,' Hassett said Sunday on NBC News. Jed Kolko, a senior fellow at the Peterson Institute for International Economics who oversaw the Census Bureau and Bureau of Economic Analysis during the Biden administration, stressed that revisions to the jobs data are standard. That's because the numbers are published monthly, but not all surveys used are returned quickly enough to be in the initial publishing of the jobs report. 'Revisions solve the tension between timeliness and accuracy,' Kolko said. 'We want timely data because policymakers and businesses and investors need to make decisions with the best data that's available, but we also want accuracy.' Kolko stressed the importance in ensuring that federal statistics are trustworthy not just for government policymakers but for the companies trying to gauge the overall direction of the economy when making hiring and investment choices. 'Businesses are less likely to make investments if they can't trust data about how the economy is doing,' he said. Not every part of the jobs report was deemed suspect by the Trump administration. Before Trump ordered the firing of the Bureau of Labor Statistics commissioner, Erika McEntarfer, the White House rapid response social media account reposted a statement by Vice President JD Vance noting that native-born citizens were getting jobs and immigrants were not, drawing from data in the household tables in the jobs report. Labor Secretary Lori Chavez-DeRemer also trumpeted the findings on native-born citizens, noting on Fox Business Network's 'Varney & Co.' that they are accounting 'for all of the job growth, and that's key.' During his first run for the presidency, Trump criticized the economic data as being fake only to fully embrace the positive numbers shortly after he first entered the White House in 2017. White House says transparency is a value The challenge of reliable data goes beyond economic figures to basic information on climate change and scientific research. In July, taxpayer-funded reports on the problems climate change is creating for America and its population disappeared from government websites. The White House initially said NASA would post the reports in compliance with a 1990 law, but the agency later said it would not because any legal obligations were already met by having reports submitted to Congress. The White House maintains that it has operated with complete openness, posting a picture of Trump on Monday on social media with the caption, 'The Most Transparent President in History.' In the picture, Trump had his back to the camera and was covered in shadows, visibly blocking out most of the light in front of him. ___ Associated Press writer Michelle Price in Washington contributed to this report. Josh Boak, The Associated Press
