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Tax, talks, and hayfever

| Posted by: Paul Donovan | Tags: Paul Donovan

  • The US Senate passed a budget resolution that the House should agree in a vote next week. This improves the prospects for tax cuts being passed. Comprehensive tax reform remains unlikely given divisions in the Senate, the small Republican majority, and US President Trump's limited past success in brokering deals.
  • The EU-UK UK-EU divorce proceedings saw German Chancellor Merkel offer conciliatory words to UK Prime Minister May, suggesting that a deal on exit was desirable. If no progress towards a deal is made in December, investors are likely to price a significantly higher risk of no deal.
  • Spain's government has started the process of controlling Catalonia directly under article 155 of the constitution. The short-term economic impact is minimal. Bank deposit shifts are the risk, as depositors compare the risk of holding money in a possibly independent Catalonia against the cost of moving their money elsewhere.
  • Japan's general election is this weekend. An opinion poll in today's Nikkei newspaper suggests that the LDP-Komeito coalition will be returned, but without the two-thirds majority necessary to change the constitution. The performance of the Party of Hope as an anti-establishment party (that wishes to abolish hayfever) may be of interest to investors. And hayfever sufferers.