Risk appetite was the name of the game during the late U.S. session after the House of Representatives passed its version of a tax bill.
- Canada’s foreign securities purchase rises from 9.77B CAD to 16.81B CAD in September
- Canadian manufacturing sales shows 0.5% growth vs. -0.4% expected, 1.4% previous
- U.S. initial jobless claims shoot up to 249K vs. 235K expected and previous
- U.S. industrial production up by 0.9% vs. 0.5% expected, 0.4% previous
- U.S. capacity utilization inches up from 76.4% to 77.0%
- NAHB housing market index up from 68 to 70 in November
- New Zealand’s Business NZ manufacturing index slips from 57.6 to 57.2 in October
- New Zealand’s PPI input (q/q) up by 1.0% vs. 1.2% expected, 1.4% previous
- New Zealand’s PPI output (q/q) up by 1.0% vs.1.4% expected, 1.3% previous
House passes its version of the tax bill
As expected, the U.S. House of Representatives passed its version of a tax reform bill today. 227 voted “yay” 205 voted “nay,” and 2 didn’t vote in the process.
The House bill is expected to cut individual and family tax brackets from four to seven and reduce the corporate tax rate from 35% to 20%. It would also scale back some tax deduction, such as the one for state and local income taxes, while preserving a capped deduction for property payments.
The Greenback saw limited gains, however, since most market players consider the Senate vote – where the Republicans can’t afford to lose more than two votes – to be the more crucial part of process and that the two houses would have to negotiate to come up with a final bill.
Problem is, the GOP is having trouble rallying support with at least two members speaking against the Senate version of the bill that includes delaying corporate tax cuts by one year and repealing some key parts of Obamacare.
Uncle Sam’s data releases
Industrial production in the U.S. shot up by 0.9% in October, marking the fastest rate in six months and second month of recovery after hurricanes Harvey and Irma weighed on production.
Initial jobless claims unexpectedly rose however, printing at 249,000 when analysts had expected the figure to remain at 235,000. Apparently, new filings surged after a backlog from Puerto Rico.
Overall risk appetite
Policymakers still have a long way to go before we see the final version of the government’s tax reform, but market players celebrated the jumping over a “small hurdle” nonetheless.
The Dow Jones Industrial Average and S&P 500 saw their biggest gains in over two months, while NASDAQ closed at new record highs.
- The Dow gained 0.80% to 23,458.49
- S&P 500 rose by 0.82% to 2,585.68
- NASDAQ jumped 1.29% higher to 6,792.86.
Even U.S. bond yields gained traction
- 10-year yield is up to 2.375% (+1.73%)
- 2-year yield is down to 1.712% (+1.49%)
Oil prices failed to join in on the party, however, as concerns over a not-so-tightening market continued to grip the markets.
- Brent crude oil is down by 0.81% to $61.37 while
- U.S. crude oil prices is down by 0.23% to $55.20
Major Market Mover(s):
The Greenback saw mixed price action against its major counterparts as dollar strength got mixed in with risk appetite after the House tax bill vote.
USD/JPY capped the session at 113.05 after dropping to 112.73, USD/CHF shot up to .9937 after slipping to .9924, EUR/USD gained 10 pips (+0.9%) to 1.1771, and NZD/USD gained 13 pips (+0.19%) to .6851.
The Loonie found support from Canada’s report showing manufacturing sales shooting higher despite lower oil prices. Prices turned mid-session, however.
USD/CAD dipped to 1.2729 before rising back up to 1.2757, EUR/CAD fell to 1.4982 before rising to 1.5015, and GBP/CAD dropped to 1.6788 before rising back up to 1.6826.
Watch Out For:
- 12:30 am GMT: Australia’s new motor vehicle sales (30.2B AUD expected, 33.3B AUD previous)