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Challenging established views

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Italy's "anti" parties are still negotiating to try and form a coalition government. New elections or a technocrat government would be the alternative. Investors do not seem unduly troubled. The main risk from this is, perhaps, the reaction of German media and the German public to the appearance of any populist Italian policies.
  • After US President Trump's U-turn on national security policy raised hopes of a trade deal with China, the US ambassador to China has been sounding less optimistic – suggesting the two sides remain very far apart. However, reversing policy positions seems relatively easy nowadays. We continue to expect a deal.
  • Turkish President Erdogan has effectively pledged to take control of the central bank, assuming victory in next month's election. The Turkish central bank has not, perhaps, been a model for central bank independence. However, Erdogan believes that raising rates causes inflation. This unusual interpretation of economics may concern investors.
  • UK labor market data is due, and should show ongoing strength. The wage data (imperfect though it undoubtedly is) will be watched. The weak first quarter growth data is not consistent with other economic signals, and a resilient consumer might encourage the Bank of England to tighten policy.