Politics dominates economics. This is never good.

Posted by: Paul Donovan

03 Jun 2019
  • China's actions over the weekend reduced the hope of a US-China G20 trade deal. There is also the threat of taxing US consumers of goods that have spent any time in Mexico. The real risk is this trade uncertainty forces any investment involving the US in the supply chain to include a risk premium.
  • Italy's governing coalition is looking fragile. The leader of the League suggested the coalition could end without agreement on a flat rate of tax. The EU is unlikely to like the fiscal consequences of that. Italy does not have a monopoly on political uncertainty. The resignation of the SPD leader indicates strains in the German coalition.
  • US President Trump supported former UK Foreign Secretary Johnson for UK prime minister. Given how US President Trump is viewed in the UK, this may be a poison chalice (perhaps retaliation for Johnson's past blunt criticism of Trump).
  • Japanese capital spending was better than expected; this was before the tax increase period (and so can be filed as "what might have been"). Various manufacturing sentiment opinion polls are available for purchase – their correlation with reality has declined in the last ten years. Four US Federal Reserve speakers are scheduled.

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