Good morning,

The OECD has suggested that the current stamp duty holiday should be made permanent and a shake up of development regulations should be used to make building easier.  They say that the UK has the highest property taxes in the developed world and stand at roughly double the average level of OECD member countries.. They argue that now is the time for radical reform to encourage development and infrastructure overhauls and that council tax overhauls could be used to plug some of the gap in income that the cut in stamp duty would leave.   The Telegraph has the story.

The UK government yesterday voted against holding a full parliamentary inquiry into the Greensill lobbying scandal.  The government voted down the Labour proposal after a fairly brutal exchange across the despatch box at PMQ’s yesterday in which Sir Kier Starmer said the affair demonstrated “sleaze and cronyism”. There are going to be inquiries of sorts, but they will stop short of a deep dive into this specific incident and look at the wider role of lobbying.  Meanwhile Simon Case has asked all civil servants to declare any paid roles or outside interests that might be deemed as conflicts of interest. The BBC has more.

In Europe:  The South China Morning Post is reporting that the EU is considering ending its extradition treaties with China over Hong Kong electoral reforms.  There isn’t a unified consensus in Europe over this, as some fear retaliation from Beijing more than others, but there is also talk of offering Hong Kong citizens easier migration and citizenship to European countries, which isn’t as direct a rebuke as banning extradition, but would also send a message.  EU leaders will meet tomorrow and debate the proposals and deliver something on Monday.

The Ukraine/Russia situation is escalating and both Germany and the US have urged the Kremlin to dial back their actions in amassing troops on the border – with Joe Biden making a call and proposing that the two leaders meet.  If there is to be a summit in in the next few months then it would be unlikely that Russia would take direct action on Ukraine ahead of that summit, so the White House’s move might have bought some time for the situation to calm down a little.  This BBC article is a longer read and gets you up to speed.

In the US:  The Fed are still sticking to their guns over inflation and interest rate rise forecasts. F ollowing on from a higher-than-expected print in March’s inflation numbers, various Fed members have reinforced their views that the uptick is temporary, and Jerome Powell has said that most members still see 2024 as the year rates start to rise.  He did concede a little on steps that they would take ahead of that though and they’d want to wind in the QE programme significantly before starting to hike rates and would likely go down the route of Ben Bernanke, which was to let the bonds bought with QE run to maturity and not reinvest, rather than try and sell back the Fed’s bond holdings to the market – which would go down like a lead balloon.  For now though, the market does seem content to buy the theory that this is only temporary.

The chip shortage that’s disrupting the auto industry continues to hit, with ford announcing another shutdown of certain plants.  However, there’s a new threat on the horizon that there isn’t an obvious solution for: rubber.  Natural rubber supplies aren’t keeping up with demand because of production problems, with things like leaf mould and flooding, compounded by producers not taking a long-term view and not increasing their planting of trees, which take seven years to mature, whilst the selling prices were low.  There’s no synthetic alternative that can match natural rubber, so this isn’t something that can just be on-shored or invested in to create a short term fix, so it might take time to play out, but could be a headache that lasts for years.  Bloomberg has more.

Today we’ll get another indicator of the great US economic comeback, with US retail sales for last month.  Biden’s stimulus cheques arrived over the second half of March, which should lead to this being a quite exceptional number, which may be discounted to some degree by the market but could provide some great risk sentiment and impetus for markets.  We’ve also got some employment numbers out of the States and there are surveys of business saying how hard it is to hire in the US now, as the number of jobs and relatively few candidates are already starting to put inflationary pressures on wages.

Be well


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