WASHINGTON (Reuters) - Following is reaction from analysts to U.S. President Barack Obama's State of the Union address to Congress, which stressed the need to freeze spending and find common ground to boost growth and create jobs.
WARD MCCARTHY, CHIEF FINANCIAL ECONOMIST, JEFFERIES & CO,
NEW YORK
"President Obama met most of our expectations by focussing on the economy, job creation, innovation and fiscal responsibility, all in a spirit of bipartisanship."
"He probably improved his image as a pro-business president in the process ... He also said a lot of 'right' things on the fiscal front and embraced the overall approach of the Bowles-Simpson Commission (on the deficit). He also said the magic words 'tax code simplification.'"
"However, some of the fiscal pieces did not appear to add up and the pledge of a $400 billion reduction in domestic spending over 10 years is somewhat underwhelming in this era of $1.4 trillion budget deficits."
"Nonetheless, the President appeared to put all budget options on the table which, of course, he needs to do if this country is to put the fiscal house in order. The president has moved towards the middle and that creates the potential for a functional government that addresses our fiscal imbalances in a meaningful way. It is a good first step."
ROBERT TIPP, CHIEF INVESTMENT STRATEGIST, PRUDENTIAL FIXED
INCOME, NEWARK, NEW JERSEY
"One of the things that was absent was any hint of protectionism. He speaks favourably of China and India. There is no hint of bashing that is something markets do not like to see."
"It is important for him to make a shift towards fiscal restraint. It's a big positive even with these baby-steps towards that direction. At least he's teeing up these issues."
"Our markets have priced in a degree of apathy and procrastination with the government's dealing with the budget deficit. They had assumed the worst. If this is a turn in policy in making progress on shrinking the budget deficit, we could see today's gains in the bond market stick."
"Overall it's a positive for bonds and stocks. An oversized budget deficit could lead to a 'crowding-out' with the government absorbing much of the capital."
"As for the currency market, loose fiscal policy could be currency positive and a tight fiscal policy could be currency negative. There was an increase in risk-taking today on the heels of the news of this speech. This could lead investors to diversify from the safe-haven dollar."
CHRISTOPHER LOW, CHIEF ECONOMIST, FTN FINANCIAL, NEW YORK
"The economy is stronger than where it was three months ago. The need for fiscal stimulus is less than what it used to be. If that's the starting point with the Republican leadership, the spending cuts will be smaller than it wants."
"It looks like these short-term steps are positive for the markets because they take modest steps towards deficit reduction."
"The stock market should be fine with the spending freeze. I don't think stocks and bonds will benefit if the cuts are too drastic because the economy is still fragile. People don't want additional stimulus here. This will allow investors to focus on the Fed."
MARKET REACTION
Stocks: U.S. stock index futures are little changed.
Bonds: U.S. Treasury bond prices are steady at lower levels.
Forex: The dollar is steady vs yen, firmer vs the euro.
