Tax Reforms Incoming
US Republicans in the Senate approved a budget blueprint last night which paves the way for tax reform, as well as allowing tax legislation to be passed by a simple Senate majority. This will allow Republican lawmakers to pass reforms in fiscal 2018 without needing the help of their Democrat rivals.
Kentucky representative Rand Paul (pictured), was the only GOP Senator to vote no to the proposal, which was passed with 51 votes to 49. His rejection of the proposal came due to his concerns over the proposal overriding federal budget caps.
This move forward has boosted market sentiment across the world today, with investors hoping for greater company earnings in future and a more competitive American economy. There is still a long road ahead however. In true Trump team fashion, the press conferences we have seen on tax reform so far have left much to be desired. Even Trump’s economic guru Gary Cohn was reliant on soundbites during his chat with the White House press corps 3 weeks ago, alongside Steve Mnuchin. Just as in the Republican healthcare bill, the contents of the tax reform proposal looked thin.
European indices including the FTSE100, DAX30 and CAC40 looked far more bullish today, erasing yesterdays losses. Aside from the Italian FTSE MIB, Euro stock markets got a fresh boost from rising bank stocks across the continent.
Across Asia, a slip for India’s NIFTY50, while the FTSE Hong Kong index narrowly outperformed its regional peers across the Chinese mainland, Japan and Australia. Hong Kong shares rebounded sharply today, climbing back up to 1,063.28 after they got bruised in the previous session due to words from China’s central bank.
People’s Bank of China governor Zhou Xiaochuan warned that risks from over optimism in the markets could lead to a “Minsky Moment” – which refers to a sudden sharp fall in asset prices following a long period of growth. This contributed to the sell-off we saw yesterday.
In foreign exchange today the Japanese Yen slid against a basket of major currencies in advance of the national election this Sunday. Prime Minister Shinzo Abe will be hoping to remain in his post and consolidate his power, vowing to take a tougher stance on North Korea and to create a stronger Japanese economy. The weaker currency helped the Nikkei index to rise for the 14th session in a row – its longest winning streak in 50 years!
The dramatic rise in Bitcoin prices we saw last week seemingly stabilised, but is now heading higher. 1 BTC currently sits at $5947 against the greenback.
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