LONDON (Reuters) - Britain's finance minister Philip Hammond will at 1230 GMT set out his first full budget statement since the referendum decision to take Britain out of the bloc.
Despite growing evidence of a serious squeeze on Britain's public services, Hammond has widely trailed that he will not relax his grip on the public purse and will prioritise further cuts to the country's still high budget deficit. A modest half a billion pounds is set to be released for more youth training on basic technical skills which are lacking in many sectors of the economy -- but this and any other spending will have to be financed from cuts or higher taxes elsewhere.
German Foreign Minister Sigmar Gabriel is to visit Poland today, a day before an EU summit that is looking increasingly tense. Apart from the anxiety being caused in the east by a western push for a "multi-speed Europe", Poland will come to the Brussels meeting determined not to back its countryman Donald Tusk for a second term as EU president. Germany and most of the rest of the bloc is equally determined that Tusk, seen widely as a safe pair of hands, gets his second term. Perverse? The answer lies in the domestic grudge match between Tusk and Poland's current rulers, the Law and Justice party (PiS) run by his arch-rival Jaroslaw Kaczynski.
In the Netherlands, far-right leader Geert Wilders has seen his ratings slip somewhat in recent weeks ahead of the March 15 election. Yet the row between Germany and Turkey over the arrest of a German newspaper journalist accused by Ankara of supporting terrorism has provided him with a new hobby horse. He will be taking part in a protest outside the Turkish embassy in The Hague today where he will argue that Turkish officials should be banned from lobbying Turks in the Netherlands ahead of the referendum on expanding President Recep Tayyip Erdogan's powers.
China’s first monthly trade deficit in three years certainly grabbed everyone’s attention first thing, but markets have barely reacted given that the import/export breakdown sends mixed signals about global growth at large and February readings are also likely distorted by the lunar new year holidays. On balance the 38 pct jump in imports during the month may be seen as a healthy rebalancing of Chinese activity despite the surprise drop in exports and, together with the unexpected pop in the country’s FX reserves back above $3 trillion, will be seen as a positive sign.
Economic numbers around the world are still mostly upbeat and a March 15 Fed rate rise is now awaited by investors and limiting market price moves in either direction as a result. A huge surge in US high-grade corporate debt sales, where the investment grade market has raised almost $36 billion in just two days, is a measure of the scramble to get funding out of the way before next week’s rate rise and how the sudden shift in Fed expectations last week caught many off guard.
Ten-year US Treasury yields nudged higher to 2.5250 percent overnight, their highest level since January. Wall St stocks fell for consecutive days on Tuesday for the first time in more than a month – with pharma stocks leading the way down after U.S. President Trump latest broadside against drugs pricing. Shanghai stocks were flat despite the trade data surprise, with Hong Kong up smartly but Tokyo tracking Wall Street lower. European stocks are set to tick lower at the open too, with eyes shifting from the decent earnings season there to tomorrow’s ECB meeting and the nervy political scene that has the Dutch elections next week.
Sterling was perhaps the biggest mover on Tuesday, with the pound falling below $1.22 for the first time since January as consumer spending reports showed growing weakness ahead of this month’s expected Article 50 trigger for Brexit. Today’s UK budget speech is expected to flag upgraded economic forecasts, but finance minister Hammond is not expected to spend the associated windfall from those upward revisions – preferring to bank them for a likely bumpy two years of Brexit negotiations. Earlier expectations of a fiscal boost with corporate tax cuts and infrastructure spending along the lines of U.S. President Donald Trump’s economic pledges now look wide of the mark, one reason for sterling’s increasingly shaky performance.
Editing by Toby Chopra