Equity markets ended the week lower, following another nuclear weapons test by North Korea and concerns about the impact of Hurricanes Harvey and Irma.  Bond prices rose as investors sought safe-haven assets pushing the 10-Year Treasury yield to 2.06, its lowest level since early November.  That in turn spurred a selloff in big banks, as lower long-term rates can cut into their profitability. For the week, the S&P Financials sector fell -2.8%.

In a sign of the continued economic recovery in Europe, the European Central Bank (ECB) upgraded its Eurozone growth forecast for 2017 from 1.9% to 2.2%.  In explaining the raised forecast, ECB President stated that “The economic expansion, which accelerated more than expected in the first half of 2017, continues to be solid and broad-based across countries and sectors.”  If achieved, the 2.2% forecast would represent the strongest growth for the region in a decade.  Separately, Draghi also indicated that the ECB will likely decide in October how to proceed with its current bond-buying program. In response to Draghi’s statements, the Euro gained nearly 1% vs. the USD, which fell to its lowest level in nearly three years. 

With the threat of a government shutdown looming and the need to increase the nation’s debt ceiling, President Trump surprised members of his own party by striking a deal with Democrats to address both issues.  The deal, which also provided hurricane relief aid, will fund the government and raise the debt-ceiling through December 8.  One possible drawback to the deal is its potential to complicate what was already slated to be a very busy Congressional calendar moving into year-end.