Futures fall on Trump’s protectionist address
U.S. stock index futures slipped on Monday as investors around the world sought safe-haven assets such as gold and U.S. Treasuries in response to the protectionist sentiments expressed by President Donald Trump in his inauguration speech. Trump pledged to put "America first" by laying out two simple rules – buy American and hire American. Wall Street has hit a series of record highs after Trump’s election in November as investors expected the economy to get a boost from his proposals for tax and regulatory reforms and higher infrastructure spending. However, investors are worried about the lack of detail on his economic policies and the impact of his isolationist stance on world trade. Trump has made it clear that he plans to hold talks with leaders of Canada and Mexico to renegotiate the North American Free Trade Agreement (NAFTA) and intends to withdraw from the 12-nation trade pact of the Trans-Pacific Partnership.
Euro-Area Debt Falls to Lowest Since 2012 as Prospects Brighten
Euro-area government debt declined to the lowest level in almost four years amid mounting signs that the economic recovery is gaining traction. The ratio of debt to gross domestic product fell to 90.1 percent in the third quarter, the European Union’s statistics office said on Monday. That compares with 91.5 percent a year earlier and 91.2 percent in the previous three months and is the lowest level since the final quarter of 2012. The region’s seasonally adjusted budget shortfall stood at 1.7 percent of output, down from 1.8 percent in the same period a year ago, Eurostat said in a separate report. With government finances burdened by bank bailouts and economic contractions as a result of the financial crisis, European authorities are calling for more budget discipline as growth prospects improve. Under European Union rules, nations are required to keep their debt ratios below 60 percent of output and limit deficits to a maximum of 3 percent.
China’s preliminary 2016 fiscal deficit $413 billion, exceeding target
China had a significantly larger fiscal deficit in 2016 than it targeted, according to a Reuters calculation based on preliminary data released on Monday by the Finance Ministry. The preliminary deficit was 2.83 trillion yuan ($413 billion), which Reuters calculates to be 3.8 percent of gross domestic product. China had budgeted for a deficit last year of 2.18 trillion yuan – equivalent to 3 percent of GDP. Beijing has relied on government spending to stabilize economic growth in the past year, but concerns about the country’s debt load are increasing. Fiscal expenditures in 2016 rose 6.4 percent from the previous year, while revenue increased 4.5 percent, the ministry said.
Brazil Government Rules Out Changes to Pension Reform Plan
Brazil’s government has ruled out significant changes to its pension reform plan as the market has already priced in its approval in its current form, according to President Michel Temer’s top aide. Expressing confidence that Congress would pass the government’s proposal in the first half of 2017, presidential chief of staff Eliseu Padilha said that there would be no negotiating over the plan’s key elements, including a minimum retirement age. Pension reform is an essential part of Temer’s plans to restore Brazil’s battered public finances. The country spends over 8 percent of gross domestic product on pension benefits, a number that the Organization for Economic Cooperation and Development forecasts will grow to 16 percent by 2050 unless there are changes.