January 24, 2018 / 8:40 AM / 10 months ago

Daily Briefing: Macron and Merkel centre-stage at Davos

LONDON (Reuters) - Speeches this afternoon by Angela Merkel and Emmanuel Macron will be among the highlights of Davos today, ahead of Donald Trump's overnight arrival in the Swiss resort.

German Chancellor Angela Merkel attends a reception of German carnival societies at the Chancellery in Berlin, January 23, 2018. REUTERS/Hannibal Hanschke

Underlining Macron's growing stature on the world stage, the White House also announced it would be hosting him in April for the first full-blown state visit of the Trump presidency (in other words with more pomp and circumstance than was accorded to British PM Theresa May for her trip to Washington - among the delights of the visit will be a dinner hosted by Trump and wife Melania). Trump and Macron have developed a fairly cordial relationship over the past year, following a well-publicised first handshake that was so tight their knuckles turned white.

There is still a degree of nervousness surrounding Germany's coalition talks and notably whether any final result will get the blessing of sceptical members of the opposition SPD party. The latest twist is a strong rise in party membership which has nothing to do with its waning appeal as a movement and all to do with an attempt by its more radical youth wing to veto the accord by urging like-minded activists to join up and so have a right to vote. Thus far, the new membership - put at around 1,800 - will have only a limited impact on the vote of around 440,000 party faithful, but it is being watched closely.

The fall-out for now from British Foreign Secretary Boris Johnson's attempt yesterday to force Theresa May to devote more funds to the ailing national health service has been a rebuke from May for trying to set new policy in public, and a few calls from Conservative MPs for Johnson to step down. Ultimately, the episode has merely revealed again how much of her ruling party is underwhelmed by her leadership - but for now sees little alternative to allowing her to carry on in power.


For the first time in a long while, global growth is speeding up away from its average rather than recovering back towards it

Another day, another string of record highs across global equity markets, although there are signs the upswing may be losing a little momentum. Wall Street and Germany’s DAX on Tuesday, and Asian shares and the MSCI World index on Wednesday all printing new highs as the global “melt up” continues. The strongest – and most synchronised – global economic growth in many years together with U.S. tax cuts and a weakening dollar are fuelling the widespread market optimism. But maybe today’s the day for some profit-taking, led by emerging market stocks, which are on track for their first fall in two weeks.

In currencies, the mighty U.S. dollar isn’t looking so mighty, falling to a fresh three-year low on Wednesday. Notably, it’s below 110.00 yen and sterling is above $1.40, the highest since the June 2016 Brexit referendum. The rise in bond yields so far this year has paused, with the 10-year U.S. Treasury yield hovering around 2.62 percent. Jerome Powell was confirmed as the new Fed chief on Tuesday, and will succeed Janet Yellen early next month. Market-moving headlines and news can come at any time from the Swiss Alps, as Davos gets into full swing. On the data front, euro zone PMIs will be the ones to watch.


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