We’ll be here all week folks

Posted by: Paul Donovan

07 May 2019
  • The weekend’s threats to raise US taxes seem set to be in focus all week. China is expected to engage in talks on Thursday and Friday. That keeps alive hopes of a deal, which is good news for those Americans that do not like paying taxes. It is bad news for investors who now have a week of uncertainty, monitoring the Trump Twitter feed for clues.
  • A higher US tax burden would damage the US economy. Soybean and corn futures prices have fallen on trade fears. Higher uncertainty about trade would further delay investment, hurting global trade and manufacturing. Markets have to judge if the US President wishes to risk this ahead of 2020 elections.
  • Economic data is less important, because the clear signs of economic stabilization are irrelevant if trade tensions increase. German factory orders would otherwise have mattered (much of the recent developed economy manufacturing slowdown was due to Germany).
  • The Reserve Bank of Australia left interest rates unchanged. Markets had been evenly divided over whether or not they might ease policy. The interminably tedious UK EU divorce lurches into “action” today, as the government and opposition resume talks after both parties suffered losses in local elections.

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