Profligate bond buying versus profligate fiscal policy
- Italian Prime Minister Conte faces a vote of confidence in the senate today, which the government is expected to win. Yesterday's vote of confidence in the lower house was noticeable for the accompanying policy program, which essentially is promising cash for all. The bond market reacted – but to the fiscal policy, not to unwarranted fears about euro membership.
- There have been media reports that next week's ECB meeting will announce or give a strong hint about the timing of the ending of the bond buying program. ECB reactions to the Italian situation are key. We have two relevant ECB speakers today.
- Trade squabbles continue. Mexico has announced taxes on domestic consumers of US steel and food. Mexican steel consumers can buy from Europe without paying the extra tax. US steel consumers face higher taxes (or are forced to buy domestic product, if available). China is talking about buying USD 25bn more US goods this year.
- Japanese labor earning data disappointed, after several months of having been better than expected. Real earnings are officially zero, but as many Japanese think inflation is higher than it is perceived real earnings are negative. Final productivity and unit labor cost data is due in the US.