Brazil’s Trump Triumphs
Brazilian stocks have continued rising following news that the far-right candidate and market favourite Jair Bolsonaro had won the country’s presidential election. Mr Bolsonaro’s pledges to clamp down on corruption, which had plagued the previous left-wing government, and to improve economic management, were welcomed both by voters and investors alike.
However, there is also plenty of scepticism that Bolsonaro will be able to deliver on the high expectations he has built up. Given Brazil’s infamously fractured Congress, it may be tough for the new president to gather the necessary support to push his legislative and reform agenda. Another obstacle for the former army captain and so-called ‘Donald Trump of the Tropics’ could be his inflammatory tendencies, including frequently disparaging remarks about women and minorities.
UK budget – all about the politics
Key aspects of the UK Budget, which was delivered by the UK Chancellor Philip Hammond on Monday included: an increase in the personal allowance threshold to £12,500 from April; an increase in the higher rate income tax threshold to £50,000; a planned 3.4% after-inflation increase in NHS funding over the next five years; and increased funding for defence and Universal Credit. The fiscal loosening implied by such changes enabled the chancellor to provide an element of plausibility to the government’s increasingly oft-mentioned claim that ‘austerity was finally coming to end’. No less importantly, the Budget was widely seen as part of the chancellor’s effort to cultivate Conservative party unity regarding the sensitive topic of Brexit. This included references to the prospect of a ‘double dividend’ (i.e. more of the same) if a smooth Brexit could be secured.
Brexit - the key to UK interest rates
Brexit is also increasingly being highlighted by the Bank of England as a key determinant of the future outlook for both the UK economy and UK interest rates. While the Bank held the base rate unchanged at 0.75% on Thursday, it indicated that the economic outlook will depend significantly on “the nature of the EU withdrawal, in particular the form of new trading arrangements, the smoothness of the transitions to them and the responses of households, businesses and financial markets”.
Wednesday marked the end of a volatile month for global equities, in which global equities, as measured by the FTSE World index, fell by 7.5%. Key drivers have included rising US bond yields, fears of fresh US tariffs on China, and a potentially more challenging outlook for US corporate profits going forward. The recent strong annual earnings growth from corporate America has given rise to “end of the cycle” fears, particularly given that the positive effects of Trump’s tax cuts will start to fade as we move into 2019.
There was some respite during the last week though. Over the four days to the close of markets on Thursday, the FTSE 100 index rose 2.5%, the S&P 500 index was up by 3.1% and the FTSE World Europe-ex UK index returned 2.9%. Investors took confidence from signs of a potential breakthrough in the trade dispute between the US and China.
This week, police in Kansas City found out that missing colons are not only a problem for grammar pedants. When cheeky thieves stole a 10-foot tall, inflatable model of the body part from a local driveway, the lawmen had to organ-ise a large-scale hunt to retrieve it. The educational prop is in the shape of an arch and details a cut-away section of the lower intestine – a semi-colon, if you like. It belongs to the Colon Cancer Coalition and was on its way to be used at a charity event. The police eventually recovered it at a vacant property after receiving a tip-off. The gutsy officers got into the spirit of things when they announced on Twitter that the situation had been rect-ified, stating “BREAKING: WE HAVE RECOVERED THE STOLEN COLON”.
Editorial image credit: Andre Coelho/Bloomberg via Getty Images
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