Markets Flat as US Congress Passes Tax Reform

Tax Reform 2017

US equity markets opened relatively unchanged on Thursday, a day after posting small losses despite tax reform successfully making its way through Congress in time for the holidays.

With tax reform having been priced in over the course of the year, including a late push in recent weeks as details of the bill became clear and progress through Congress was made, it’s evident that it is already priced in. While we’re not yet seeing signs of corrections following – in buy the rumor sell the fact fashion – markets may struggle for positive catalysts over the next week or so.
 

Catalan Looks to Elect New Parliament But Crisis May Go Unresolved

Catalonia will vote to elect a new parliament on Thursday, a couple of months after the previous administration was sacked, with some members jailed and others opting for self-imposed exile in Belgium. It is hoped that the election will resolve the issues of independence and show that the majority of Catalans do not, in fact, favor independence from Spain. Unfortunately, it’s very unlikely to be so straightforward.

The topic of independence is a very divisive issue in Catalonia and it remains quite evenly split between those wanting it and those not. There’s a good chance that this election will produce a hung parliament which will far from resolve the crisis and even a small majority for independence parties will be unlikely to see them get their wishes.

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BoJ Warns Against Speculation of Monetary Tightening

The yen is trading a little lower today after the Bank of Japan left monetary policy unchanged at its final meeting of 2017 – a result that surprised no one – while re-emphasizing its commitment to its ultra-accommodative stance. There had been some speculation that the central bank may be tempted to take its foot off the gas soon as the economy is performing well and inflation is no longer in negative territory.

Governor Haruhiko Kuroda stoked this further at a speech in Zurich last month when discussing the potential for low interest rates to be contractary, which some viewed as a signal that the central bank may consider tightening in fear of such a scenario. As it turns out, Kuroda was not implying such an action and claims the BoJ remains committed to achieving its 2% inflation target, which weighed a little on the yen.