Global stock markets are rising as investors brace for President Joe Biden to propose a $ 6 billion spending package when he unveils his first budget later today.
Biden is expected to propose record federal spending of $ 6 billion in fiscal 2022, starting in October, to reach $ 8.2 trillion by 2031, according to a New York Times report.
Citing documents it obtained, the NYT said the Democratic president plans to pay for his agenda by increasing corporate taxes and high incomes, with budget deficits set to decline in the 2030s.
The budget will show how Biden intends to deliver on his broad national agenda. This includes the U.S. Jobs Plan to build new transportation, water, energy, and broadband infrastructure, modernize homes and boost manufacturing, and the U.S. Family Plan to invest more in child care. ‘children and education.
The budget will also explain how the White House sees inflation, jobs and economic growth develop. The budget deficit is expected to reach $ 1.8 billion in 2022.
But the documents will also be ambitious. Biden’s Democrats hold only a slim majority in the House and Senate, and Republicans are pushing for a smaller infrastructure package instead. A pitched battle therefore awaits us.
As Reuters explains:
Republicans have slammed the president for asking for billions of dollars in new spending, paving the way for pitched battles over his priorities.
“It looks like the trillions keep coming,” Republican US Senator Shelley Moore Capito, who leads a group of colleagues pursuing a counter-offer to Biden’s current $ 1.7 trillion infrastructure proposal.
President Biden said at an event in Cleveland yesterday that now is the right time to invest in the economic recovery:
“Now is the time to build (on) the foundation we have laid to make bold investments in our families, our communities and our nation.
We know from history that this type of investment raises both the floor and the ceiling of the economy for everyone. ”
Welcoming recent progress against Covid-19, Biden added:
“We have turned the tide on the pandemic that has never existed in a century.
“And now we are faced with a question: what economy are we going to build for tomorrow? What are we going to do? I think the time has come to rebuild an economy from the bottom up and from the middle. ”
Asia-Pacific stock markets were boosted overnight, Japan Nikkei surging 2.1% and that of South Korea Kospi gaining 0.8%.
Investors predict that this increase in U.S. spending will spill over into the global economy as Jeffrey Halley, senior market analyst at OANDA, Explain:
President Biden’s preliminary budget projects a deficit of $ 1.8 trillion next year, after tax increases.
Of course, what the president would like, and what he gets from Congress could be very different, but with this level of spending, Asia seems to think that part of that bag of goodies is going to fall on them, and the Asian stock markets rose today.
Yesterday’s strong economic data is also supporting stocks, with the number of new US jobless claims falling to pandemic low yesterday, and US growth confirmed at 1.6% pacy in the last quarter (as UK and eurozone contracted) .
Ipek Ozkardeskaya, senior analyst at Swissquote, this:
Robust first-quarter GDP growth, a new weak pandemic in weekly jobless claims, and discussions over a $ 6 trillion federal spending program for the next fiscal year have boosted appetite for most stocks and the economy. American dollar.
But could inflation fears still spoil the party? Later today, we get the latest index of “PCE base price” – the US Federal Reserve’s preferred inflation indicator, which excludes volatile food and energy prices. It is expected to rise to 2.9% on an annual basis, from 1.8%.
The University of Michigan’s final consumer sentiment index for May is likely to point to inflation concerns affecting confidence (as the preliminary report showed earlier this month).
- 10 a.m. BST: Eurozone consumer confidence report for May
- 1:30 p.m. BST: U.S. personal income figures for April
- 1:30 p.m. BST: core US PCE price index (the Fed’s preferred measure of inflation)
- 3 p.m. BST: University of Michigan Consumer Confidence Index for May