A Tale Of Ten Cities• By Rabobank's Benjamin Picton
Futures markets are pointing to a flat start to the week after the US 10-year yield closed back below the 4% level on Friday, ISM and PMI data came in strong, and stocks finished up. The Fed's Daly won't have helped sentiment much with further promises of rates being higher for longer and warnings of structurally higher inflation. Neither will the ECB's Christine Lagarde talk of the need to deal with the "monster" of inflation. Nor will the weekend's China's National People's Congress, which set a "modest" GDP growth target of 5% while further centralizing control in the hands of Xi Jinping. Outgoing Premier Li Keqiang said "struggle creates brilliance." Helpfully then, China's defense spending will rise 7.2%, and the US is close to instigating capital controls to prevent investment in Chinese tech.
Li also said "Hard work builds the future." In his trademark style, so did former President and 2024 aspirant Trump, who unveiled his vision for ten new 'Freedom Cities' to be built on federal land, opening a new American frontier to offer low cost homes to millions - and replete with flying cars. Trump's vision was of the Jetsons, plural, as he also spoke of a baby bonus aimed at lifting a sagging fertility rate, and support for Medicare and social security. There was also a new (old?) program of public works to "get rid of bad and ugly buildings and return to the magnificent classical style of western civilization." These new spending promises are to be funded, at least in part, by universal tariffs via "America first" mercantilism. China should be nervous; and so should US allies and trade partners thinking of 1930s-style US isolationism while other Great Powers are returning to 1930s-style belligerence. So should markets, perhaps, because Trump dominated the conservative CPAC convention despite mainstream and social media not covering what he says anymore. Indeed, his grip on the Republican party still seems strong enough that an alternative Daily title suggested by the regular author of this Daily was 'Trumpy Python's Flying Car-cass'.