Market Rebounds

Daily Analysis - 13/02/2018

US Domestic Spending

trump-infrastructure-plans


The Trump administration unveiled a long-awaited infrastructure plan that includes $200 billion in federal infrastructure spending over 10 years. GDP is reported in Japan while global equities recover.

Trump’s Budget and Infrastructure Plan


On Monday, the White House unveiled President Donald Trump's much anticipated infrastructure plan that aims to restore the nation's roads, bridges, tunnels, and more.

The infrastructure plan includes $200 billion in federal funding over the next 10 years and aims to raise up to $1.5 trillion in total in local investment. The plan includes incentives for investments from state and local governments, as well as private firms.

The path to passing the budget looks rocky for now.

The proposal fits into President Donald Trump’s broader plan to boost U.S. oil and gas development by slashing red tape, something that has cheered energy industry but raised concerns among environmentalists and Democratic lawmakers.

The infrastructure proposal released on Monday could speed up the permissions of U.S. natural gas pipelines, including by cutting Congress out of the process for allowing them to cross national parks. This is among the major reasons why the proposals designed to encourage spending on improvements by states, localities and private investors face an uphill battle in Congress.

The $1.5 trillion infrastructure proposal would give the interior secretary the authority to approve natural gas pipelines that cross the country’s national parks, changing the requirement that Congress authorize such projects.

In financial terms, Trumps’ budget proposal is set to increase government spending adding more pressure on inflation growth which could put the US economy in an overheated territory earlier than expected.

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European Equities Set To Follow Wall Street Higher


European stocks could follow their U.S. and Asian peers higher on Tuesday. The major U.S. indexes rebounded from their worst weekly performances since January 2016, with financials and technology companies among the top gainers.

The S&P 500 has risen 2.9% over the previous two sessions, marking its best 2-day gain since the 1st week of January 2016.

As there is a negative correlation between the currency and the stock market of the country, Japanese shares were down from their daily highs as the yen advanced against the dollar ahead of U.S. inflation readings for CPI and retail sales are due on Wednesday. Oil traded firm and gold held steady on dollar weakness.

European markets rose sharply on Monday as global equities bounced back after posting their worst week in years. The German DAX rallied 1.5%, while France's CAC 40 index and the U.K.'s FTSE 100 both rose about 1.2%.

Consumer and producer prices from the U.K. are due later in the day, headlining a light day for the European economic news.

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Gross Domestic Product reading for Japan


Japan will publish preliminary Q4 data for the Gross Domestic Product at 8:50AM Tokyo time on Wednesday (23:50 GMT Tuesday).

The report is expected to reveal expansion of the Japanese economy by 0.2% in the last three months of the year, compared to growth of 0.6% in the preceding three-month period. The annualized rate of the economy is expected to show growth of 0.9%, which would mark a sharp slowdown from growth of 2.5% in the third quarter.

Private consumption, which accounts for roughly 60% of gross domestic product, was seen rising 0.4% in the fourth quarter, after it showed a decline of 0.5% in the previous three-month period.

It is also important to note Japan policymakers endorse reports that BOJ Kuroda could get another term. There have been some indications recently that the Bank of Japan is setting the ground to begin discussions on winding back its quantitative easing program, triggering speculation it will follow the Fed and ECB and start normalizing policy sooner than expected.

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