Another enjoyable day of news for the market to ponder upon, most of which has originated in the US, however company earnings releases around Europe are starting to pick up pace with heavyweights such as Lloyds, Astra, WPP and BASF reporting on Thursday. Donald Trumps Tax reforms, which are a cornerstone of the new administration’s policy initiatives, were officially released on Wednesday evening. It may be fair to say the intention was announced, the details of how they will get there were slightly vaguer. The headline grabbing announcement, which had been well flagged was the intention to cut corporation tax from a top rate of 35% to 15%. Taking US corporation tax from one of the highest rates around the globe to one of the lowest. There are also intended changes to personal taxation, one of which was to simplify the system, possibly a leaf that Mr Hammond might like to grab onto when looking to his next budget. The equity and bond market greeted these announcements with a complete indifference as both markets closed the day pretty much at levels where they opened. Aside from the travel and arrive aspect, there remain many uncertainties that, rather like healthcare reforms this bill will spend months in Congress and the result will probably be a watered-down version.
What may have been of more significance was the other announcement that Donald Trump no longer wants to cancel the North American Free Trade Agreement (NAFTA). Instead he wishes to renegotiate the agreement. The Mexican Peso and the Canadian Dollar rose on this news. It seems unclear what brought this change of heart around, but this adds to a recent list of “changes in policy”.
The Central banks of Europe are back in focus today, ahead of the meeting next week from the Federal Reserve. The muted response by the markets to these tax reforms may take some possible pressure off the Federal Reserve next week, however equity markets do continue to expect the next rate rise in June.
The ECB left interest rates where they were at the monthly rate setting meeting on Thursday. There was some speculation, post Macron’s victory, alongside the improving economic outlook for the region that the accompanying statement may drop the phrase “risks remain to the downside”. In the end this comment remained. Interestingly Mario Draghi did make this comment more in relation to the global economy rather than the eurozone specifically.
Due to Monday’s bank holiday, Friday is the last trading day for April in the UK. April has not been a dull month by any means, traditionally May is the time we should sell and go away!