UBS On-Air: Paul Donovan Daily Audio 'Reassuring signals?'
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Good morning, this is Paul Donovan, Chief Economist at UBS Global Wealth Management. It's seven o'clock in the morning London time on Monday the 27th of January. China's industrial profits grew in December and, on the official data, the profit margins seem to be broadly stable. This has some relevance outside of China's borders as this sort of profit activity is not consistent with China dumping large amounts of product into international markets.

Dumping goods involves exporters deliberately selling at a loss to attempt to dominate an overseas market. And that, of course, is not especially consistent with stable profit margins. This isn't to say that dumping might not be happening in a specific sector, but it doesn't seem to be happening generally. Germany releases the E4 Business Sentiment Poll today.

This is not a great deal of real-world relevance, given the politicisation of sentiment data and low response rates that any survey request gets these days. However, Germany has long had a tendency to be too pessimistic in its real-time data, both the sentiment and the real-world data. There is a question as to whether the prospects of an election might start to shift that particular pessimism, or whether, in fact, it has become too entrenched.

The United States also has business sentiment polls which are definitely subject to political bias, although the language in the Dallas Fed manufacturing sentiment comments section is always worth looking at, just to get a sense of how partial these supposedly objective survey responses can be. New home sales data is also due from the States. Housing is becoming a growing economic concern across a wide number of countries.

Housing costs account for some of the disaffection of the younger generation, and the relative unaffordability of housing is something that has a bearing on savings behaviour too. Markets may possibly get some relief from the reality of US immigration and tariff policies exhibited over the weekend.

US President Trump's pledges to deport large numbers of migrants and indeed citizens are a concern to financial markets because of the disruption to US supply chains that this would entail. Investors have assumed that not much will change and while it is early days, that does appear to be the case. Trump does not seem to be doing much more than former US President Biden did on migration except in the area of publicity.

although that publicity may create a fear of deportation that disrupts, for instance, agricultural employment. Similarly, the threat of tariffs against Colombia over the weekend were backed away from relatively quickly, suggesting that for some trade taxes, the talk should not be taken too seriously. However, there has been a shift in tariff approaches by the US government, and some trade taxes do seem to be likely to be more enduring.

That's all for today. Have a good day.

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