REPORT
By Övünç Kutlu
U.S. briefing, April 24

What happened last week?

One of the most important developments in the American economy last week was in U.S. President Donald Trump’s proposals for tax reform of which Treasury Secretary Steven Mnuchin has been tasked to carry out.

Trump signed three executive actions Friday that ordered the Treasury Department to overview tax rules and financial regulations. 

The first executive order Trump signed enables Mnuchin to begin the process of "tax simplification". Trump said reducing tax regulations is the first step towards tax reform, which proposes lowering tax rates for the American middle-class and businesses. 

The second executive order instructs Mnuchin to review "the damaging Dodd-Frank regulations" which holds back Wall Street firms, Trump said. The president also said that he would open up lending to small businesses. 

Trump's third executive order will "identify and reduce tax regulatory burdens", which Trump said is about "financial stability.”

Trump's executive orders, which come a week before his 100-day mark as president, will allow Mnuchin to have 150 days to make recommendations to the White House.

Mnuchin said Thursday that the White House's plan to make a major overhaul of the country's tax system would come "very soon.” He did not offer a time frame but added he hopes it will not take until the end of this year for it to pass through Congress.

Mnuchin's statement on Thursday had a positive impact on Wall Street, with all the three major indexes rallying on the news. The Dow was up 0.9 percent, the S&P by 0.8 percent, and the Nasdaq by 1 percent, after the secretary's announcement.

Another important development last week was the International Monetary Fund (IMF) and the World Bank’s spring meetings held in Washington.

Turkish Deputy Prime Minister Mehmet Simsek relayed on Thursday that Turkey needs to find ways for its economy to grow 5 to 6 percent per annum.

"For us, 3 percent growth was mediocre. We have to find 5 to 6 percent growth. We believe we can do that … Turkey had more than its fair share of challenges. We had some regional geopolitical tensions. Last year was a very difficult year. But, now that we have this referendum too, we set the stage for stability in the medium- and long-run. It gives us the opportunity to now deliver structural reforms," he said. 

A Turkish referendum Sunday ensured President Recep Tayyip Erdogan would have executive powers. With that in the rear view mirror, Turkey can now focus on reforms, according to Simsek. 

"In the short-run, the referendum should help. We prioritize education, infrastructure, research and development. It's working out … we need to come up with bankable projects and a predictable framework. Turkey has been extremely successful in projects. We are building the world's largest airport in Istanbul, [in which], private sector initially invested €10 billion," he said.

The IMF Managing Director Christine Lagarde said Thursday that the IMF would cooperate with the U.S., despite President Donald Trump's proposed protectionist policies to promote global trade.

"From the various contacts that I've had with the administration so far, I have every reason to believe that we will make progress," Lagarde said.

"We are concerned about trade because it has been a main engine for growth, and it's actually been one of the pillars of prosperity and growth going forward … Global trade requires ‘a level playing field,’ but it should not have any ‘distortive measures’ or ‘protectionist measures going forward,’” she added

World Bank Group President Jim Yong Kim said in the meeting on Thursday “I think a lot of people blame trade for the loss of jobs ... but if you ask the World Trade Organization, they will say at the very most only 20 percent of job losses are from trade … We believe that globalization and free trade have had just an absolutely huge impact on poor people and poor countries. I think what you see is a reduction in inequality between countries.”

Last week, American companies continued to announce their net income and revenues for the first quarter of this year. Some of the major firms that announced their earnings are as follows:

Goldman Sachs and Bank of America saw their net incomes and revenues increase in the first quarter of 2017, the global investment banking giants said Tuesday. 

Goldman's net income rose 1.2 percent to $1.68 billion in the first quarter, from $1.66 billion the same period a year ago. The bank's revenue rose from $6.34 billion to $8.03 billion, during the same period, posting a 26.6 percent increase. 

Bank of America's net income rose 81.5 percent to $4.9 billion in the first three months of the year, from $2.7 billion during the same period a year ago. Revenue increased from $19.7 billion to $22.2 billion -- a 12.7 percent rise. 

Morgan Stanley saw its net income and revenue increase in the first quarter of the year, the bank said Wednesday. The bank's net income increased 71 percent to $1.93 billion in the first three months of the year, from $1.13 billion during the same period last year. Morgan Stanley's revenue rose nearly 25 percent to $9.74 billion in the January-March period.  

Yahoo’s net income and revenue rose in the first quarter, the Internet Company said Tuesday. Revenues rose 22 percent to $1.33 billion in the first three months of 2017, from $1.09 billion the same period a year ago. Yahoo posted a $99 million loss a year ago, but saw $99 million of net income in the first quarter of 2017. 

Telecommunications giant Verizon saw its net income and revenue decline in the first quarter, according to its financial results released Thursday. Net income fell 20 percent to $3.55 billion in the first three months of the year, from $4.43 billion for the same time a year ago. Revenue decreased 7.3 percent to $29.81 billion, from $32.17 billion, during the same period.

General Electric saw its income increase, but revenue decline, in the first quarter of the year, according to the statement of financial results released by the American multinational corporation on Friday. The company had a net income of $619 million in the first three months of the year, after having a net loss of $61 million during the same period last year. Revenue, however, decreased 0.6 percent to $27.66 billion in the first quarter of this year. 

North America's biggest energy infrastructure company Kinder Morgan saw its net income and revenue increase in the first quarter of this year, the company announced Wednesday. The firm's revenue rose by 7.2 percent to $3.42 billion in the first quarter of 2017, from $3.19 billion during the same period last year. Net income reached $440 million in the first three months of the year, from $315 million during the same quarter last year.

 

What to expect this week?

American firms will continue to announce their earnings this week. Some of the major companies that will declare their quarterly results are as follows:

Global oilfield services company Halliburton will declare its first quarter earnings on Monday, while the U.S.-based telecommunication giant AT&T will release its results on Tuesday.

On Wednesday, Boeing and Twitter will announce their first quarter results.

On Thursday, Google and its parent company Alphabet will release their net income and revenues, in addition to e-commerce giant Amazon. The same day, American Airlines, Ford, and chipmaker Intel will declare their results.

On Friday, American energy giants ExxonMobil and Chevron will announce their net income and revenues for the January-March period this year.

On American macroeconomic data, the conference board’s Consumer Confidence Index, and new home sales for the month of March will be out on Tuesday.

Durable goods sales and weekly initial job claims are to be announced Thursday.

And, on Friday, investors will closely watch the first quarter GDP figures for the American economy.

Weekly change in the U.S.’ crude oil inventories and crude production will be announced Wednesday, while the weekly change in the oil rig count will be reported on Friday. 

24 Apr,2017

Download
REPORTS