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On the Wires

Hints at tax cuts for the UK, timeline for UK rate cuts brought forward, US governments agree another funding bill, PM of Israel rejects idea of Palestinian state, stock market causes headaches in China, and today's data.

Running late, but feeling great… here’s what the news wires are saying…

In the UK

Jeremy Hunt has hinted at tax cuts, which comes as absolutely no surprise as poll ratings continue to hover around the same levels they were when Liz Truss threw a grenade into the economic machine. There were no details on the type or size of cuts, but he said that countries with lower tax burdens were seeing more dynamic and faster growth. The March budget will be the next and possibly last big event that is in Rishi’s control that he gets to woo voters with – but it’s also something that will risk the ire of unhappy members of his own party and, if Mr Hunt were to go too far on taxes, could upset the Office of Budgetary Responsibility, so once again he’ll be walking a tight rope!

The Times is reporting that the Home Office have hired an aircraft hangar and a fuselage to practice forcing migrants onto Rwanda flights (which sounds laughable until you realise it’s tragic). Scenarios that are being practiced include violence, playing dead and dirty protests! They’re estimating that it will take five officers to transport one migrant to the plane – which would make an EasyJet boarding positively speedy by comparison!
Click here to read: Home Office hires hangar to practise forcing migrants on to Rwanda flights (thetimes.co.uk)

JP Morgan have brought forward their timeline for UK rate cuts, from November to August – there are plenty of people that thought it would be sooner, but JP Morgan have aired on the conservative side until now. They think we’ll get three cuts, totalling 75 bps, and they’ve re-forecast UK growth over this year from 0.2% to 0.3% – not quite time to break out the champagne, but at least it’s an upward revision.

In the US: the government have agreed another funding bill that will avert a government shutdown and continue funding day to day spending until the 8 March. The hope now is that legislators can use the time to push through a dozen individual spending bills in the next 6 weeks in order to avoid yet another emergency funding stop-gap. The rock and the hard place is the division between Democrats and the majority of Republicans who are fiscal conservatives. This is the third stopgap bill passed in the fiscal year that began on October 1. Politico has the details: click here to read.

 

In Israel: PM Netanyahu has said that he rejects the idea of a Palestinian state once the conflict comes to an end and vowed to press on with military action in Gaza “until complete victory”. This is pretty much the opposite of what most of Israel’s allies  (and the rest of the world) wants to see, which once again highlights how little influence Joe Biden’s administration has on the country. The comments will receive mixed reactions from his domestic audience, no doubt pleasing his core supporters and the far-right ministers in his coalition government but there are plenty that will be frustrated on his stance, preferring instead for him to focus on bringing back hostages rather than try and destroy Hamas. The BBC has the story: click here to read.

In the Red Sea: Joe Biden has admitted that airstrikes against Houthis haven’t stopped the attacks on ships in the region but has vowed to continue with them until they stop the violence. The US launched two further strikes yesterday and the UK hasn’t been involved in any action since last Thursday, despite Grant Shapps saying that we were willing to do so if required.

 

In China: the stock market is causing headaches, as it continues to fall from global money being pulled out of equities. The sell-off is a reaction to dissatisfaction over how Chinese authorities are managing economic stimulus, which has caused the Hang Seng China Enterprises Index to fall 11% so far this year, adding to a 14% loss from last year. The move was accelerated after Chinese Premier Li Qiang spoke at Davos on Tuesday with no hint that the government were coming to the rescue and with the GDP figure being announced a day early by Mr Li at 5.2%, investors think that Beijing is actually pretty comfortable with the state of the economy and might just let the market sort itself out.

Looking to Today

UK retail sales were shocking – and they were forecast to be bad in the first place! The forecast was a decline of 0.5% but the actual decline was -3.2%, the fastest rate of decline since the first Covid lockdown. Later today we get some home sales data and some Fed speakers, but nothing that we’d expect to move the market.

Have a great weekend.

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