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Saturday 18th March 2017
Hi Friend,
Botched budgets lead on to fortune ...
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Good news for the Chancellor? Botched budgets lead on to fortune. Chancellor Phil has a hole in his spreadsheet. The planned National Insurance rise has been scrapped. The Prime Minister made it clear, the lady may not be for turning but the Treasury certainly is. Enough trouble on the back benches without a manifesto pledge own goal. Spreadsheet Phil was obliged to deliver a despatch box spin. A humiliating climb down, damaged the image of a steady pair of hands. Fortunately Jeremy Corbyn couldn't deliver a knock out blow. The Chancellor will survive the set back, for the moment at least.
No need to worry about the hole in the budget, just a modest revision from the OBR will plug the gap. The good news? Botched budgets lead on to fortune, as George Osborne demonstrated this week. Author of the Omnishambles budget, the pasty tax and the caravan tax, the former Chancellor has taken on the job of editor of the Evening Standard. Editor in the morning, parliamentarian in the afternoon, in just four days a week, the MP for Tatton will pick up over £300,000 a year. Day five, a chance to earn the £650,000 from Blackrock Investments for his one day a week deal. Weekends - free to work on the book and the lecture circuit, helping to balance the Osborne household budget. Nice work if you can get it. Let's hope the Northern Powerhouse will get a column in the London free sheet.
Other news this week, Charlotte Hogg resigned from the Bank of England. The Deputy Governor failed the stress test in front of the Treasury Select Committee. Failing to inform or fill in the form about a brother working for Barclays, it was enough to force the Harvard Scholar out. A confused response to a question about QE didn't help.
Interest rates were on hold this week. The MPC voted 8:1 to keep rates on hold. Kristin Forbes the hawk voting for a rate rise is scheduled to leave the Bank of England in June. The Governor's quest for gender balance took a further hit this week.
Unemployment fell in January to 4.7%. It hasn't been lower than this for forty years. (It was actually 4.7% as recently as 2005). The earnings puzzle continues. Wage growth slowed to 2.2% in January. The decision to avoid any rates action made easier by the slow down. But what if low rates are contributing to low earnings growth? How strange the twists on Planet ZIRP. The Fed moved to normalise rates with a further hike this week. The yanks are pulling out, over there!
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Article 50 ... shouldn't take too long says Davis ...
David Davis, Secretary of State for Exiting the EU, was in front of the EU select committee this week. Sorting out Article 50 shouldn't take too long, said the confident Davis. "It can be done in two years!" Michel Barnier the EU's chief negotiator had warned any deal would be subject to agreement from thirty seven regional and national parliaments. This alone could take six of the twenty four months allocated to the process. No problem. "It can be done in eighteen months if need be", claimed the assured Davis. Excellent.
Tariffs of 30% - 40% on dairy and meat. 10% bills on cars would follow from a bad Brexit deal. The UK government would have to introduce the Great Repeal Bill, a repeal of the European Communities Act of 1972, translation of the "Acquis Communitaire", plus bills dealing with immigration, environment, financial services and more.
"Is it true", asked the Chairman of the committee, "the UK will fall out of the open skies agreement between the EU and the USA!" Who had realized, the Atlantic will become a no fly zone for the British, unless a further deal was put in place! No problem. Davis will probably deal with that too. "Attitudes have softened in Europe since the referendum" explained the Secretary of State. "Our friends are disappointed we are leaving". Access to free trade, outside of the customs union, with controls on migration plus the great escape from the clutches of the European Court of Justice, the hoped for outcome.
"Has any modelling been done about the economic impact of a no deal outcome" asked the chair of committee. "No" replied the Secretary of State. You get the feeling they think it won't be needed! Let's hope so! |
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West Wing ... Whisky Tango Foxtrot ...
The phone tapping saga continued to run all week in the White House. Despite the lack of any evidence the story runs and runs. The White House issued a denial of any apology to the UK for suggestions GCHQ was involved in Trump Tower espionage. The President explained he didn't actually have any "evidence" just an article on wire tapping generally and a short piece on Fox News.
Kellyanne Conway explained "wire tapping" can take many forms. "Even the microwave can be turned into a camera" claimed the Advisor to the President. Who would have thought that!
David Tennant was in trouble this week. Doctor Who was seen brewing tea in a time machine. Actually he was heating up an earlier brew in a particle process accelerator. Yep he used a microwave. Who would have realized, he could have also taken a picture. "I am no Inspector Gadget" said Conway and "I am not in the job of having evidence" she said. Yep we know that!
Back in the White House, the latest immigration ban was subject to court challenge from Hawaii and Maryland, the health care bill is rattling around Congress and the administration submitted the first draft of the budget. A big increase in defence spending, a huge cut for everything else especially the Department of State, the EPA and "meals on wheels". Badly drafted and ill prepared, there's a long haul ahead before any approval is forthcoming from the Democrats and the Republicans for that matter.
Rex Tillerson was in Asia this week. Trump has placed North Korea on notice. "North Korea is behaving very badly" tweeted the President, adding "China has done little to help". So much for diplomacy. Every option is on the table warned the White House administration, including the threat of military action.
Chancellor Merkel was in Washington yesterday. The President had hosted the Irish Prime Minister earlier in the day. It was St Patrick's day after all. "Did you know Saint Patrick was an immigrant!" Enda Kenny delivered a lecture on the merits of migration. It didn't go down well.
Worse was to follow. The meeting with Merkel, an episode of Blind Date from Hell. A dialogue of the death. Body language bad, the President couldn't even shake hands before the cameras. Trump just can't get a grip on the whole EU thing! Fair trade not free trade the mantra for those manipulating currencies.
At least the commitment to NATO survived, along with and agreement on joint action in Ukraine. The Germans will commit to spend more on defence as part of the deal.
That's all for this week from the West Wing Whisky Tango Foxtrot ...
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So what happened to Markets?
The Fed moved to hike rates, markets rallied, Dollar softened! The Dow closed at 20,948 from 20,855. The FTSE closed at 7,424 from 7,343.
Sterling was up against the Dollar to $1.239 from $1.216 and was up against
the Euro to €1.153 from €1.139. The Euro moved up against the Dollar at 1.075 from 1.067.
Oil Price Brent Crude closed at $51.75 from $51.44 The average price in March last year was $38.21
UK Gilts
- yields moved down. UK Ten year gilt yields closed at 1.23 from 1.38. US
Treasury yields softened to 2.50 from 2.60. Gold closed at $1,230 from
$1,199.
John
That's all for this week. Don't miss the pro-manchester Business Conference in March. We focus on Digital Disruption and the Smart City Challenge. Sponsors Samsung will be demonstrating the latest in virtual rally, plus we have the latest on robotics, AI and autonomous vehicles.
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