The Week Ahead: Jan. 23-29, 2017

Cabinet votes, hearings | Trump meets with UK PM | GOP retreat

Senate votes and hearings on President Donald Trump’s Cabinet, more executive orders and a visit between Trump and United Kingdom Prime Minister Theresa May are the key items in Washington this week.

The retreat for Republican House and Senate lawmakers, in Philadelphia, is set for Wednesday evening through Friday and will tighten this week’s schedule for voting on Cabinet picks. Trump is expected to meet with Republicans on Thursday. UK Prime Minister Theresa May is speaking to Hill Republicans in Philadelphia, and then going to meet with Trump in D.C.

Confirmation votes, hearings and organizational meetings top the agenda for Congress. For the confirmation hearings in the Senate, sessions are on tap for nominees for Attorney General, Housing and Urban Development and Education. Attention will also be on how many of the “next” tier of government officials will get nominated to the “number two” and “number three” spots at the various agencies. Indications are those many see a lot more diversity in terms of the names forwarded for those roles.

The Senate will vote Monday on the nomination of Rep. Mike Pompeo (R-Kan.) to head the CIA. The vote will take place after six hours of debate, in line with an agreement reached between Republicans and Democrats.

The Senate Foreign Relations Committee is expected to vote on Rex Tillerson’s nomination for Secretary of State. Sens. John McCain (R-Ariz.) and Lindsey Graham (R-S.C.) said Sunday they would support Rex Tillerson’s nomination for the State Department after the lawmakers had expressed concerns about the former ExxonMobil Corp. chief’s ties to senior members of the Russian government. A third Senate Republican, Florida’s Marco Rubio, is now the key vote on the Senate Foreign Relations Committee, where Republicans hold a one-vote majority. But even if the committee does not approve Tillerson for the State Department post, the full Senate can still vote on his nomination—a rare, but not unheard of, procedural tactic.

Senate Majority Leader Mitch McConnell on Sunday predicted the Senate would confirm all of Trump’s Cabinet picks, over Democratic lawmakers’ objections to some of them. On Friday, the Senate confirmed retired General James Mattis as secretary of defense and retired Gen. John Kelly as Homeland Security secretary. White House officials expect at least three more cabinet nominees — Ben Carson for Housing and Urban Development, Nikki Haley as United Nations ambassador and Rick Perry for energy secretary — to face votes by week’s end. Cabinet nominees need a simple-majority vote to win confirmation, a threshold Republicans, who hold 52 seats, will likely meet.

The House side will be focused on the standing committees as they set their policies and rules for the session ahead and take a look at ObamaCare.

President Donald Trump will host British Prime Minister Theresa May at the White House on Friday, January 27, his first meeting with a foreign leader since taking office, the White House said Saturday. White House press secretary Sean Spicer said Trump also plans to meet with Mexican President Enrique Peña Nieto on January 31 at the White House. He said the two leaders will discuss trade, immigration and security. Trump spoke Saturday with Canadian Prime Minister Justin Trudeau “about strengthening the relationship of the two nations,” Spicer said, and the leaders agreed to arrange a later meeting. Trudeau told Trump that Canada is the top buyer of goods for 35 US states.

The Trump administration will lay the groundwork this week for a trade deal between the US and the UK that would take effect after Britain leaves the European Union, a White House aide said. “We’ll have an opportunity to talk about our possible future trading relationship, but also some of the world’s challenges that we all face -- issues like defeating terrorism, the conflict in Syria,” and NATO, May said in an interview on the BBC’s Andrew Marr Show on Sunday. “When I sit down with Donald Trump, I’m going to be talking about how we can build on that special relationship.” Two of President Donald Trump’s senior advisers, Steve Bannon and son-in-law Jared Kushner, met with UK Foreign Secretary Boris Johnson in New York on January 8. The three are preparing for the future pact, the aide said. Trump’s team is also considering a deal to reduce barriers between US and British banks, the Sunday Telegraph reported, citing officials from both sides.

May said Sunday she will talk about trade and security when she meets with Trump, but will not be afraid to challenge him on issues she finds unacceptable. “We’ll have an opportunity to talk about our possible future trading relationship but also some of the world challenges that we all face,” May told the British Broadcasting Corp., citing terrorism, the Syrian conflict and the importance of the North Atlantic Treaty Organization as key examples. In a Thursday speech to the World Economic Forum in Davos, Switzerland, May implicitly criticized Trump’s approach to trade, presenting a strong defense of free trade and globalization.

Under European Union laws, nothing can be signed or formally agreed to with another country before the UK leaves, which is on course to happen in March 2019.

In 2015, the US was the destination for a fifth of UK exports of goods and services, at $124 billion. Around half of those exports were services, including financial and business services, telecommunications and travel, while Americans also bought British-made drugs, electrical equipment and machinery. After the EU, the US is the UK’s biggest overseas market.

Trump to meet leaders of Mexico and Canada to renegotiate NAFTA. President Donald Trump said Sunday he will meet with Mexican President Enrique Pena Nieto and Canadian Prime Minister Justin Trudeau to discuss changes to the North American Free Trade Agreement (NAFTA), a long-stated Trump campaign promise. “We’re going to start some negotiations having to do with NAFTA,” Trump said of his upcoming meetings with the two leaders.

Trump signed an executive order to restrict ObamaCare and a regulatory freeze memorandum was released. President Donald Trump signed an executive order directing agencies to “ease the burden” of the ObamaCare (Affordable Care Act) during the transition to repeal and replace, press secretary Sean Spicer said.

Trump also signed commissions to allow newly confirmed Secretary of Defense James Mattis and Secretary of Homeland Security John Kelly to be sworn in, Spicer said.

Separately, White House Chief of Staff Reince Priebus sent out a memorandum to all departments and agencies asking them to abide by a regulatory freeze until further notice, Spicer said. This is a typical request by new administrations to give the White House an opportunity to review pending regulations.

The regulation freeze memo appears to impact a final rule published January 19 setting animal welfare standards for poultry and livestock. It was scheduled to take effect March 20, with portions phased in through 2018. The rule is meant to enable USDA to certify products as organic.

Requirements to carry out a mandatory labeling law could also be impacted by the regulatory freeze. A prerule, a very preliminary regulatory step, pending at the Office of Management and Budget (OMB) is an initial attempt by the department toward establishing a framework for identifying food products subject to the law.
The interim rule would allow farmers to sue a poultry processor and pork and beef meatpackers for unfair practices if they can show that the company’s actions had adverse consequences.

One proposed rule would address the poultry tournament payment system in which a poultry farmer’s birds are ranked in comparison to other farmers’ birds. Payments to growers are increased or reduced based on the performance outcomes.

GIPSA rule. Another proposed rule would clarify what the Grain Inspection, Packers and Stockyards Administration (GIPSA) defines as unfair practices and preferences that violate the Packers and Stockyards Act of 1921 governing livestock and poultry marketing and sales. The rule would establish criteria to protect the legal rights of farmers.

It is a full market week ahead, complete with updates on housing, manufacturing, the services sector and the overall US economy as we closed out 2016. The week opens with the PMI Manufacturing, Existing Home Sales and Richmond Fed Manufacturing updates on Tuesday, followed by the FHFA House Price Index on Wednesday. The biggest day for reports is Thursday with reports on International Trade in goods, Weekly Jobless Claims, Chicago Fed National Activity Index, PMI Services, New Home Sales, Leading Indicators and the Kansas City Fed Manufacturing Index. The week closes with Friday releases on Durable Goods Orders, GDP and Consumer Sentiment. The focus continues on whether report data back up the Fed expectations on interest rates or not in the year ahead.

There are no Fed speakers on the schedule as the blackout meeting one week before the next Federal Open Market Committee (FOMC) meeting arrives Tuesday. That will leave market participants without any Fed reactions economic data. Plus the any actions by the new administration may get market attention and could alter equities, government bonds and currency markets. But the January 31-February 1 FOMC session will stay at the forefront, especially with Thursday’s barrage of data and the Friday update on the first reading on how the US economy closed the final quarter of 2016.

The week for US agriculture will have the weather situation in South America – Argentina in particular – as one of the key factors. Traders have been taking note of heavy rains and dry conditions that are raising questions about Argentine soybean production that was already likely to be down due to policy shifts that are encouraging farmers there to plant crops like corn and wheat. The full week also means that the weekly updates will be arriving on their normal days – Monday for Grain Inspections and Thursday for Weekly Export Sales. Those remain two key updates for markets as they gauge the demand for US agricultural goods from foreign buyers. There are other updates out as well, with Cold Storage and Milk Production on Tuesday and the Food Price Outlook data on Thursday. That is likely to show that consumers still are finding a “deal” at the grocery store. The week wraps up with the Cattle on Feed data on Friday. Plus, ag interests will want to see if there is any fresh news on Sonny Perdue, the nominee to head USDA.

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