Markets update: Equities fall as US tax plans hit speed bump

Markets | Mon 13 Nov | Author – Business & Finance

As earnings season draws to a close, Ian Slattery finds that of the S&P 500 that reported, tech, materials and healthcare are leading the charge.

ian slattery zurich

Ian Slattery

Reports from the US that the Senate and House have diverging plans for their respective tax reform bills weighed on markets with the Senate’s version delaying corporate tax cuts until 2019, as opposed to next year. These differences will need to be reconciled for the administration to get legislation passed.

As earnings seasons draws to a close, of the 88% of the S&P 500 that have reported, 72% have seen positive surprises in relation to earnings-per-share, with tech, materials and healthcare leading the way. The picture was less positive in Europe where lacklustre earnings weighed on markets, with equities having their worst week in three months.

Oil continued its recent positive run, as political uncertainty in Saudi Arabia pushed prices to just short of $57/barrel.

However, the picture was brighter on the economic front with manufacturing and services PMI data beginning the fourth quarter on a high note. The European Commission has subsequently upgraded its 2017 GDP growth rate to 2.2% from 1.7%.

The global index in euro terms returned -0.6% last week, as Europe suffered its worst week since August, although remains up over 10% in 2017.

Oil continued its recent positive run, as political uncertainty in Saudi Arabia pushed prices to just short of $57/barrel.

The ten-year US bond yield closed the week at 2.4% with the German equivalent closing at 0.41%. The EUR/USD rate closed at 1.17, and has stabilised somewhat in recent weeks.

THE WEEK AHEAD

Tuesday 14 November

The second estimate of Q3 eurozone gross domestic product (GDP) goes to print, with the consensus expecting a growth rate of 0.6% (quarter-on-quarter).

Wednesday 15 November

US consumer price index (CPI) data for October is released and will be watched closely by the market as the Fed eyes a rate rise next month.

Thursday 16 November

Eurozone inflation for October will also be made available this week, the first figures since the European Central Bank (ECB) announced the recent reduction in the QE programme.

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