THE DAILY MACRO BRIEF: May in the hot seat, Trump cleared, Rate curve...

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03/25/2019 | 03:15 pm
The British Prime Minister will leave office on conditions... Donald Trump’s name is cleared in the Russian investigation. The yield curve is reversed in the United States.

May will do anything for an orderly Brexit. Some members of the British government would like to bring Theresa May down. The British Prime Minister promised to resign on condition that MEPs approve the exit plan she has bitterly negotiated with Brussels. If they vote in favor of the treaty, then the United Kingdom will leave the EU on May 22, otherwise Brexit will take place on April 12.

No collusion between Washington and Moscow. Prosecutor Robert Mueller said there was no evidence that Donald Trump's campaign team conspired with Russia in the 2016 presidential elections. Nor is there any evidence that Russia had anything to do with the defeat of Democratic candidate Hillary Clinton. Donald Trump immediately reacted by tweeting "no collusion, no obstruction, complete and total EXONERATION" and told the press that it is a shame that his "country had to go through this". However, "if this report does not conclude that the president has committed a crime, it does not exonerate him either", the prosecutor revealed. The issue of obstruction of justice is likely to continue to be debated in Washington and democrats may well demand the full publication of the justice report.

Reversal of the US yield curve. On Friday, interest rates on 3-month US debt rose above 10-year yields, indicating an anomaly since the longer the investment period, the higher the return. However, two-year yields remain slightly lower, but according to the San Francisco Central Bank, studying the difference between three-month and ten-year rates is more relevant to predict a probable recession.

In other news. Chinese President Xi Jinping will be received by Emmanuel Macron, Angela Merkel and Jean-Claude Juncker on Tuesday. Brussels is worried about Rome, judging its economic growth estimates to be "too optimistic" and expecting a new fiscal standoff. Donald Trump told Fox Business News that he would not abolish customs duties on cars imported from the European Union because he wants European manufacturers to produce them directly in the United States. Standard and Poor's has maintained Spain's credit rating at A- with a positive outlook. On Friday, the Atlanta Fed revised upwards its GDP growth forecast for the first quarter from 0.4% to 1.2% (on an annualized basis). In contrast, a panel of 55 American economists estimates that "economic growth has reached a turning point" and has lowered its forecasts for 2019, averaging 2.4% this year and 2% in 2020. The Central Bank of Russia decided on Friday to leave its key interest rates unchanged (main rate at 7.75%), but reduced its inflation forecast for this year by 0.3% to between 4.7% and 5.2%. The French Minister of Economy and Finance advocates tighter controls to combat money laundering in Europe and proposes "the creation of a genuine European supervisory agency". The Ifo business climate index recovered in March to 99.6 from 98.5 previously. Following the publication of the manufacturing PMI index, which fell sharply in Germany (to 44.7), the yield on 10-year government bonds fell below 0%, something that had not happened since the end of 2016 (see graph).

Anaïs Lozach
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