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Gridlock possibilities

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Markets expect the Democrats to take control of the US House of Representatives. Markets thus expect policy gridlock (which stops the deficit getting worse at a faster pace). A Democrat House would likely increase investigations into the Trump presidency. That eats into the finite resource of the administration's time. Time spent with lawyers is time not spent doing anything useful.
  • Euro area producer price inflation is due – a signal of corporate pricing power, which also offers some insight into how Euro area exporters have responded to the Trump trade taxes. German factory orders data is due. There is hope that German automakers have got their acts together over regulation, and will provide upside risks to activity in the coming months.
  • Chinese Vice President Wang gave mixed signals on trade. There was an appeal to Chinese nationalism (talk of "imperialist powers"). There was a signal that China was willing to talk with the US. If China makes some largely meaningless gestures, the US may back down (as with not-NAFTA, or the EU). If the current negotiating position continues, US consumers are likely to face a tax hike on 1 January.
  • The UK cabinet meets on the UK-EU divorce. No one cares.