US Fiscal Speculation Lies Ahead

In keeping with his campaign promises, US President Donald Trump is forging ahead with plans to slash budgets at several government departments while raising defense spending.  According to early leaks ahead of Trump’s remarks set to be delivered during the Asian session, defense spending is set to jump by $54 billion after cuts are made to the State Department, EPA, and other non-defense agencies within the US government.

While details on proposed tax reform and fiscal stimulus measures remaining notably absent from the conversation, financial markets are expecting further details to be unveiled during the upcoming policy speech for Congress. In the meantime, whispers of spending and inflation, positive measures were enough to drive stock benchmarks to fresh intraday records, with Dow futures extending the prior session’s modest gains.

The spectacular climb in French inflationary metrics over the last few months appears to have hit a roadblock after the advance reading of February headline consumer prices came in lower than anticipated.  Compared to forecasts of a 1.70%, the preliminary inflation reading came in at 1.20% on an annualized basis, also printing below the prior month’s figure of 1.30%.  While there is still a revision ahead, it could indicate that the gains in energy prices are gradually fading from inflation figures, especially when taken in the context of the Euro Area Harmonised Index of Consumer Prices which retreated from 1.60% to 1.40% during January.

In a positive sign, growth during the fourth quarter matched an earlier estimate of 0.40%, with one final revision due near the end of March.  After closing flat on Monday, the French CAC 40 remains under modest pressure at the open of European trade.