Khatija Haque - Head of MENA Research
Anita Yadav - Head of Fixed Income Research
Edward Bell - Commodity Analyst
Published Date: 01 March 2017
President Trump’s speech to the joint houses of Congress provided very little in the way of detail on the administration’s economic policy. Trump reiterated his plans to simplify the tax code and provide relief for corporates and middle income households, boost spending on defence and veteran care, invest USD 1tn in infrastructure and repeal and replace Obamacare.
The initial market response has been relatively muted, with the USD index a touch firmer this morning and Asian equity markets trading higher. However, better than expected Chinese PMI data and a sharp rebound in Japanese capital spending may have contributed to the latter. Both the official and Caixin PMI surveys increased by more than forecast in February on stronger new orders and output. Businesses were also more optimistic about the outlook for the next year in February. China’s non-manufacturing PMI eased slightly but still points to strong growth at 54.2. In Japan, capital spending in Q4 2016 rose 3.8% y/y compared with expectations for a 0.8% rise and following a contraction in Q3. Japan’s manufacturing PMI (53.3 in February) was only marginally lower than January’s 53.5.
US economic data was also better than expected yesterday, with the consumer confidence index rising to a 15-year high in February and both the Chicago Purchasing Managers’ Index and the Richmond Fed manufacturing index rising by much more than forecast, suggesting strong expansion in the manufacturing sector. There is a raft of US data due today, including the Markit manufacturing PMI, ISM manufacturing, personal income & spending, construction spending and the Fed’s Beige Book. The probability of a Fed rate hike this month increased after New York Fed President Dudley and the San Francisco Fed’s Williams both indicated they would seriously consider a rate hike at the 14-15 March meeting.
Global economic activity gains momentum
Risk sentiment still driving FX