Global Stocks Down With U.S. Tax Reform Doubts

black monday

On Monday, the uncertainty over the U.S. tax reform continued to drive world stock markets away from recent record highs, while Britain’s pound decreased with concerns of Prime Minister Theresa May’s future Shares in Frankfurt, Paris and Milan dropped about 0.5 percent. Yet, London’s blue-chip held positive while sterling fell by 1 percent, its largest daily fall in more than 10 days.

MSCI’s world equity index, which tracks shares in 47 countries, was down 0.5 percent moving away from record during the week prior. The index is now down for three days in a row for the first time in months. Tokyo’s Nikkei dropped by 1.3 percent, bringing down MSCI’s Asia-Pacific Index 0.6 percent. U.S. stock futures pointed to a weak start on Wall Street.

Caution continues as investors wait for the commencement of a U.S. tax deal. U.S. Senate Republicans have revealed a plan which differs from the House of Representatives’ plan and neither are on the same page. “All eyes are on what the Senate and the House of Representatives will do on their tax bills,” said Nobuhiko Kuramochi, chief strategist.

“That there is debate is not surprising at all. Still, it is an uphill moment for markets.”

The attention was on the pound, which dipped nearly 1 percent to $1.3063 as trouble accumulates for May and Brexit deal is approaching a deadline. The Sunday Times newspaper reported that 40 members of parliament from May’s Conservative Party had agreed to sign a letter of no-confidence in her, if eight more agree it will trigger a party leadership contest.

The dollar was constrained by the uncertainty of the tax reform. It drew 113.32 yen, over a full yen under last week’s seven-month high of 114.735 yen. The euro traded at $1.1651. Brent crude futures gained 3 cents at $63.55 a barrel as U.S. West Texas Intermediate crude increased by 10 cents to $56.82.


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