Tax legislation to be voted on this week, Wall Street bonus pools set to shrink, and another big week for Brexit.
Counting the votes
President Donald Trump said the U.S. economy will “start to rock”
as the tax overhaul plan seems set to pass key votes this week,
allowing the president to sign legislation before the holiday break. The
final text of the compromise bill was published on Friday
evening and it shows the corporate tax rate permanently lowered to 21
percent with across-the-board tax cuts for individuals until 2026. A
late change to the bill included a provision that will provide a
multimillion-dollar windfall to real estate investors. Also in Washington this week, lawmakers are working on a bill to avoid a government shutdown on Friday.
Shallow end
While
2017 may have felt like a busy year, three rate hikes, European
elections and the ins and outs of Trump’s legislative agenda did little
to drive market volatility. Which means that revenue at Wall Street’s biggest banks has slumped, which is bad news for the bonus pool
to be shared among traders at those institutions. People familiar with
the figures say the amount of money available for the packages has
dropped between 5 and 10 percent from last year. Things are looking even worse for those working for European banks.
More Brexit nailbiting
U.K. Prime Minister Theresa May is due to set our her vision for the post-Brexit transition period in a speech to parliament at 10:30 a.m. Eastern Time today. She faces twin challenges
of not saying anything that will upset EU negotiators too much, while
also saying enough to unite her own cabinet. The European side is due to
unveil its stance on the issue on Wednesday. Any major differences that emerge will likely weigh on sterling, which is already the worst-performing G10 currency this month.
Market rally
Global markets are rallying following the publication late on Friday of the agreed text of U.S. tax legislation.
Overnight, the MSCI Asia Pacific Index rose 0.8 percent, while Japan’s
Topix index closed 1.4 percent higher. In Europe, the Stoxx 600 Index
was 0.8 percent higher at 5:45 a.m., with all industry groups gaining. S&P 500 futures added 0.3 percent, the 10-year Treasury yield was at 2.373 percent and gold was slightly higher.
Political boost
It’s
not just U.S. politics driving gains. In India, there was a volatile
session in the benchmark S&P BSE Sensex Index which closed 0.4 percent higher,
recovering earlier losses of as much as 2.6 percent after Prime
Minister Narendra Modi’s party emerged victorious from an election in
his home state. South Africa’s rand was at a three-month high
against the dollar and bond yields fell as traders bet Cyril Ramaphosa
is poised to become the next leader of the ruling African National
Congress. In Chile, Billionaire Sebastian Pinera won
the second round of presidential elections, with the victory by the
pro-business candidate likely to see stocks in the country open higher
today.