The market's reaction to Trump and four other things to look for in economics this week

The thing I shall be watching will be long bond yields. If the markets don’t really believe what the Donald is saying, then, well yields won’t move much. All talk and no trousers? We will see

The markets were stunned following Trump's inaugural address (Win McNamee/Getty)

The first of those will be the reaction to Donald Trump as President. There has been a weekend to ponder. When he made his first speech in response to his victory he was conciliatory and gracious, and the markets loved it. That inaugural address was utterly different and there was a shocked response: not negative as such, just stunned. This week we will begin to see what big money makes of it all. The things to look for will include what happens to the dollar: does it remain strong in response to faster than expected increases in interest rates; or does it weaken, because that is apparently what the new President wants?

Also, what will happen to the share prices of different segments of US industry? Will the basic manufacturing companies do better, again in response to the tone of the address? Is this good or bad for finance? And what about energy – do the oil and gas giants benefit from rolling back environmental controls, or are bigger forces, such as global supply and demand more important? And can a President really increase US growth in any sustainable way?

For myself, the thing I shall be watching will be long bond yields. If the US government is going to cut taxes and run a bigger deficit, and if growth is indeed going to be faster, then long rates have to rise much faster than seemed likely a few months ago. You should see that expectation in bond yields now. If on the other hand the markets don’t really believe what The Donald is saying, then, yields won’t move much. All talk and no trousers? We will see.

The second thing will obviously be Theresa May’s visit to the White House. Is there really a trade deal with the US in the offing? If so, that does put a different tone onto our negotiations with Europe as and when they begin. As with all such talks – and these ones are preliminary – beware the headlines. The US will be a tough negotiator, for this is not charity. But it will be interesting if a President who says American interests will be first and that the country has been weakened by its previous trade deals will be prepared to open up another. Clearly we are not Mexico.

Beyond those two big ones, what else? There are two important, but backward-looking, numbers. These are the final quarter GDP figures for the UK and US. These give us the first official numbers for 2016 as a whole, and are expected to show that the UK grew by more than 2 per cent last year with no significant slowdown in the final three months of the year. These are first estimates so not to be taken too seriously but they will be helpful as they will also show how much momentum the two economies have going into the present year.

That leads to the fourth thing to look for, the so-called flash PMIs, which show how optimistic the business community is for the next few months. They are not perfect forward-looking indicators by any means, but they are the best ones we have. Everyone expects some sort of showdown this year for the UK. Does it look serious, or just a modest trimming?

Finally, I’m interested in the weather – or rather the climate. Confirmation is coming though that 2016 was indeed the hottest ever for the world. It is the third year on the trot to set a new record. Whatever view you take as to the causes, and the scientific community is pretty solid about the importance of human activity, warming is real. And that will change economies. Politicians make their speeches, but look instead at what companies are doing about it. Ultimately it will be commercial companies that have to take measures to counter climate change, for whatever government do that will take time. Meanwhile, for the business sector this is a huge opportunity both to do the right thing and profit from it.