The FTSE is flat in early trading this Wednesday morning as investors wait for the US Tax Reform Bill to finally get the go-ahead, having hit another snag yesterday.
CMC Markets analyst, Michael Hewson commented “Having teased, tantalised and promised the markets for most of this year that we would see some significant measures to reform the tax code it seems that US President is on the cusp of delivering some measures that, depending on who you listen to, are either transformative or unfair.”
ADS Securities analyst, Konstantinos Anthis added “The market consensus seems to be that the changes included in the bill will help corporations free up capital but whether this money will be reinvested to further spur growth and lift the economy as a whole remains to be seen.”
The question for investors to decide is whether there are more gains to be enjoyed once the bill finally pushes through or does the old adage ring true – buy on the rumour, sell on the fact?
Progress on the tax reform bill has done little to boost the Dollar with many investors eyeing the Federal Reserve interest rate policy for 2018 as a more important indicator. Konstantinos Anthis suggested “Given that Jerome Powell is set to take the seat in early February market participants are unsure whether to enter into dollar longs before they get the chance hear from him and assess his outlook on the pace of monetary tightening.”
The pound is in focus today as Bank of England Governor, Mark Carney addresses Parliament “even though he’s not likely to touch upon monetary policy themes he should make a reference to the Brexit negotiations.” added Anthis.
US equity markets, meanwhile, retreated on Tuesday as investors took profits ahead of the Christmas break. Accendo Markets analyst, Mike van Dulken commented “Apple suffered only its third broker downgrade of the year and its first since June. Subsequent share weakness saw Tech underperform across indices, with the Nasdaq underperforming following recent strength while the Dow Jones saw further weakness from Goldman Sachs and Visa.”