US tax cut bill will set tone for markets

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Trump's reform has investors astir; bourses also expecting slew of US indicators before Christmas

It is the week before Christmas, when throughout the bourses around the world investors are all astir, thanks to the United States tax reform.

Progress of one of the biggest US tax rewrites since 1986 will take centre stage this week, as Republican lawmakers and US President Donald Trump try to score their first major legislative victory, following a string of failures including attempts at repealing Obamacare.

Working in Mr Trump's favour is the locking in of two previously wavering Republican senators, Marco Rubio and Bob Corker, who have pledged support to the reform over the weekend, sending Wall Street to fresh highs.

Still, the resistance from three Republican senators who remain uncommitted is enough to defeat the measure in a Senate that Mr Trump's party controls with a slim 52-48 majority.

Republican leaders want to vote on the bill in both chambers early in the week so that the President can sign it into law before Christmas, and the development will most certainly preoccupy investors here and elsewhere in regional markets from opening bell today.

IG Markets' Jingyi Pan noted that markets had largely factored in central bank meetings last week, with the Federal Open Market Committee's meeting conclusion being a key component.

She said hopes for a more aggressive interest rate hike path next year were dashed, leading to a corresponding decline in the US dollar and financial stocks.

In the week ahead, investors will be expecting a slew of US indicators that will rush to arrive before the Christmas holiday, Ms Pan said.

"These include November's personal income and spending numbers, durable goods and housing updates," she added.

The third and final reading for US' third quarter gross domestic product will also be released ahead of last month's core personal consumption expenditures (PCE) update, where a moderation in month-on-month core PCE growth had been penned in.


Economic data and market action in China, India, and the US last week suggest that the days of easy money are coming to an end, said DBS in its weekly wrap.

"With growth and trade going strength to strength globally, monetary authorities in China and the US are trying to revert to a non-crisis policy stance," it said.

"In India, the central bank is seeing nervousness about inflation, balance of payments, and fiscal pushing up long-end yields. Easy money days are becoming scarce in all three cases."

In particular, the People's Bank of China's move to tighten some rates on Friday is a seen as a preemptive action to safeguard the stability of the Chinese currency while US Fed hikes progress, noted DBS.

"It also signals that de-leveraging in China will persist. The capability of small/medium banks to roll out ambiguous wealth management products will be weakened further due to rising funding costs," it said.

Now that the central bank meetings in advanced economies have settled, attention will turn to Asia, with central banks in Japan, Taiwan and Thailand expected to meet soon.

Analysts are not expecting changes in monetary policy.

The latest tweak in message from the Bank of Japan had been further affirmation that the central bank is unlikely to shift its stance in the near term, pointed out Ms Pan.

She added that China's upcoming Central Economic Work Conference will also be in the spotlight as the three-day meeting's conclusion will be parsed for insights into Beijing's 2018 economic agenda.

"While these may be broad level items, the focus for Asia's largest economy would still be looked at - the first since the 19th National Party Congress," she said.

At home, Singapore's non-oil domestic exports last month will be released today with a significant moderation expected.

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