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Investors must roll the tax dice

Opening moves for Asia Pacific shares are more difficult to forecast this morning, and some traders expect heightened volatility. The US Senate voted in favour of tax reform after markets closed on Friday night. The reaction of investors is unpredictable in light of positive market moves ahead of the vote and suggestions that corporate tax cuts are to some extent already priced in.

The challenge for Australian investors is doubled as the local bourse opens at the same time as the US futures overnight market. The reaction of US investors is pivotal. While the reduction in tax rates is widely viewed as stimulatory, and therefore supportive of higher share prices, the stellar run and record levels of US share indices have some fearing a “sell the fact” reaction. This would likely weigh on global investors sentiment.

It’s another important week for global economic data. China trade numbers, Japan’s consumer confidence and US non-farm payrolls all have the potential to shift markets.

Australian investors are looking at the tail end of the AGM season. TPG and Nufarm both front shareholders this week. The emphasis may shift to macro data with reporting of Q3 GDP growth on Wednesday. Expectations are subdued around an annual rate of 1.8%. A read significantly different from forecast will speak directly to the future course of interest rates.

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