GLOBAL MACRO NEWS
US economy slowed in fourth quarter
After getting a major lift from a surge in US soybean exports in Q3, US economic growth slackened to an annualized pace of 1.9% in Q4 from the 3.5% reading in Q3. One bright spot in Friday’s US data releases was a third straight month of improved capital expenditures. Capex has been particularly sluggish in recent years, and an upturn in capital investment could contribute to better corporate profits down the road.
Trump gets down to business
The Trump administration took a series of executive actions in its first week in office including approving the long-stalled Keystone XL and Dakota Access pipelines. President Trump met with the CEOs of several manufacturing companies, including the Big Three automakers, and encouraged them to build new plants in the United States. Trump also met with union leaders. The administration also announced it will nominate a replacement for Supreme Court justice Antonin Scalia on 2 February. Foreign trade, much discussed by candidate Trump, remains a major focus, with the new president this week threatening a 20% tax on Mexican imports.
Dow reaches milestone
The Dow Jones Industrial Average closed above 20,000 on Wednesday for the first time in its 120-year history. The average approached the mark several times in the weeks following the 2016 US elections before finally punching through on Wednesday, 25 January.
Parliament must have say on Brexit: UK high court
The United Kingdom’s 12-person Supreme Court ruled this week that parliament must vote to initiate the triggering of Article 50. Prime Minister Theresa May has said the ruling will not slow down the Brexit process and that Article 50 is on track to be triggered in late March. The Supreme Court also ruled that the devolved governments of Wales, Scotland and Northern Ireland do not need to be consulted on the matter. Economically, Brexit has not been the disaster that pundits predicted. GDP grew by 0.6% in Q4, and by 2% for 2016 as a whole. On Friday, the prime minister became the first foreign leader to meet with President Trump, discussing a post-Brexit trade pact with the US.
Weak yen boosts Japanese trade
A weakening yen and strong US auto sales in 2016 help boost Japan’s trade balance into surplus for the first time in six years. Japan posted at $60 billion surplus with the US, 40% of which was derived from sales of autos and auto parts. Its global surplus was $36 billion. Helped by the weaker yen late in 2016, exports rose in December for the first time in 15 months, according to Ministry of Finance data. Meanwhile, Japanese inflation remains well below target, with core consumer prices falling 0.2% in December, the 10th consecutive monthly decline.
Canada to set own course on NAFTA
While the Canadian government has not taken any final decisions on how it will approach the renegotiation of the North American Free Trade Agreement, sources told Reuters this week that Canada will look after its own interests first and allow Mexico to fend for itself. Unnamed officials told the news wire that Mexico is in a much worse bargaining position than Canada, so that it would not make sense to create a joint front against the US.
THE WEEK AHEAD
- Markets in China remain closed for the lunar new year on Monday, 30 January and Tuesday, 31 January
- The US reports core personal consumption expenditures price index data on Monday, 30 January
- The Bank of Japan holds a rate-setting meeting on Tuesday, 31 January
- Manufacturing purchasing managers’ indices are released globally on Wednesday, 1 February
- The Bank of England holds a rate-setting meeting on Thursday, 2 February
- Service sector PMIs are released globally on Friday, 3 February
- The US releases its January employment report on Friday, 3 February
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Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News;Financial Times; Forbes.com; CNNMoney.com; NBCNews.com.
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