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| Posted by: Paul Donovan | Tags: Paul Donovan

  • Several investors will have spent the first weekend of the New Year in quiet reflection. Perhaps reading a book. The content of "Fire and Fury" is unlikely to affect investors' perceptions of US assets. Coming decisions (debt ceiling, budget, etc.) will be led by Congress. The political capital of US President Trump is not especially important.
  • The White House has suggested the Fed does not need to change its tightening plans after the tax cuts. The economic boost from the cuts could be around a quarter percentage point on growth. That is unlikely to excite the Fed.
  • Euro area retail sales data are due. Domestic demand is an important factor in Euro area growth this year. Stronger domestic demand in the Euro area and the US is evident in the late 2017 Asian trade data.
  • Saudi Arabia, which implemented a VAT sales tax last week, this week raised wages for civil servants and the military. The cost is put at USD 13bn to USD 14bn. Running deficits forces Saudi Arabia and other Middle East countries to use savings to finance consumption. Savings are biased to US assets. Consumption is biased to Asian and European goods and services. This has capital flow implications.