US: Focus remains on the outlook for tax reform – Danske Bank

It has been quiet overnight as market focus remains on the outlook for US tax reform amid the two chambers of Congress set to pass the bill, according to analysts at Danske Bank.

Key Quotes

“Yesterday evening European time, the House of Representatives initially passed the bill with a 227 to 203 vote, with 12 Republicans and all Democrats voting against. However, according to House Majority Leader Kevin McCarthy, the House will have to vote on the bill again today as the draft voted on did not survive two provisions of Senate budget rules. The Senate is also set to vote on the bill today and at this stage it seems very likely that we will get the biggest overhaul of the US federal tax code in decades – a victory deemed very important for Republican chances of retaining control of Congress at next year’s mid-term elections.”

“In terms of the actual growth impact, we think the effect will prove limited as the tax reform primarily benefits the wealthiest who have a lower marginal propensity to consume and as the outlook for investment boost is dampened by the fact that credit has been cheap and easy in recent years. The risk to our call is that investments will rise more than expected as the demand for investments could see a boost.”