Weekly Reports | Sep 09 2011
By Greg Peel
President Obama effectively delivered Part 1 of a two-part fiscal policy proposal this morning, live to Congress, the nation and the world. Part 2 will come next week when the president submits to the budget committee an outline of how the Administration intends to pay for the US$420bn stimulus package he has now announced.
There were no surprises in a well-leaked speech, with extended cuts to payroll tax, infrastructure spending intentions, and incentives for businesses to employ those long out of a job as well as returning veterans all part of the plan. Whether you're an Obama fan or not, no one can deny the president is a powerful orator with a capacity to enliven patriotic fervour. His political credentials have been sorely tested over the past three years, but his speech clearly landed the ball right in the Republicans court, entreating the GOP not to derail the Democrat policy to make America great once more. “You must pass this bill,” he exclaimed, implying that to not do so would quite simply be un-American.
How will offshore markets respond to the speech tonight? A quick look at the Dow futures at the time of writing indicates little response at all. There were no shocks in the speech, we are awaiting next week's outline of how US$420bn can be spent and the US budget deficit still reduced, and now begins the protracted, partisan and party-political process of sending the bill back and forth between Congressional houses. There is no way the Republicans will pass the bill as is, even if they think it's not a bad one. With the election due next year, the GOP will have to make it look like whatever concessions and changes they insist upon renders the bill a Republican, not a Democrat, initiative.
Wall Street's response tonight will also be net of today's Chinese data dump and whatever unfolds in the next installment of In Europe Tonight.
Next week sees some important data releases in the US, including the monthly Treasury budget, retail sales, industrial production, the PPI and CPI, and the manufacturing indices of the New York and Philadelphia Fed regions. The Treasury will also auction three, ten and thirty year bonds into a market in which yields are at or near historical lows, QE3 anticipation is high, and fears over Europe higher still.
In Australia we will learn how businesses and households coped with the volatile and scary month that was August, with the release of the NAB business and Westpac consumer confidence surveys. ABARE will also release its winter crop report.
On the local stock front we will see another extensive tranche of stocks going ex-dividend next week, with Monday again the big day.
For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.