Market Review – Fundamental Perspective 14 November 2017

Equities had a mixed day yesterday with European indices printing losses whilst US markets registered marginal gains. The USD and US Treasury yields were supported by a continuation of Republican tax cut efforts and Asian markets were largely unchanged as of midday local time today.
Kevin Brady, House Way and Means committee chairman, said that he is confident that the tax bill will pass in the House according to Bloomberg but he insisted that keeping some of the state and local tax deductions is a priority for the House, in contrast to the Senate proposal.
The House is targeting a vote on the tax bill before Thanksgiving (23-Nov) whilst the Senate is aiming for early December.
In the UK, the government conceded to demands to allow a full vote on the final Brexit deal in Parliament ahead of key discussions regarding the Withdrawal bill this week. With only a small majority in Parliament, the British government will face an immense challenge and will most likely have to rely on crossparty goodwill to get the Brexit deal approved in Q1 2019.
This morning, focus will be on the inflation print and Barclays Research expects “…headline and core inflation to move sideways in October…”.
Focus today will fall on central bank leaders Draghi, Yellen, Carney and Kuorda who are scheduled to speak at a policy panel organized by the ECB today at 10.00 London time.
Barclays Research expects “…a hawkish stance from Carney to prompt a repricing of BoE Bank Rate expectations and support GBP this week…”.
As for the Yellen, a December Fed rate hike is almost fully priced in but the pricing of the bank’s interest rate path is relatively benign. Therefore, any constructive remarks by Yellen could place upward pressure on short-term interest rates and USD.

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