Edmond de Rothschild – Macro Highlights – October 9th 2017 – ISM, US employment and Catalonia & Sectorial impact of US tax cuts

Economists' insight: The Fed steals Donald Trump’s thunder

Economist insights: Positive US momentum confirmed by the ISM and employment figures, Catalan crisis weighs on the markets in Spain (p.1)

›       While the optimism from the ISM needs to be put into perspective faced with a sharp rise in new orders following Hurricanes Harvey and Irma, the underlying trends are still good

›       With the drop in unemployment and acceleration in wage growth, the Federal Reserve should raise its Fed Funds rate by 25bp in December, in line with our expectations

›       The political crisis in Catalonia could continue to fuel volatility on Spain’s financial markets, but the European authorities are expected to be able to keep the systemic risk in check

US focus: The tax cuts are expected to be more favourable for some US businesses than others (p.5)

›       Some sectors could benefit more than others from the new tax measures proposed by the US government. This is notably the case for the industrial sector…

›       …which could fully benefit from the tax cuts, without being penalised by the partial repeal of interest deductions on borrowings, because they have relatively low interest expenses

›       Overall, we still expect the income and corporate tax cuts to pave the way for US GDP growth to reach 2.5% in 2018


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