World stock markets edged lower yesterday, with Wall Street slightly lower and the US dollar modestly weaker after details of a Republican tax plan were released, while sterling dropped after the Bank of England’s policy announcement.
The Republican tax plan called for a swath of changes to the US tax code, including slashing the corporate rate and reducing the number of tax brackets for individuals.
“There is a lot of hope built into this market right now that is probably a little bit too much optimism based on how the economy is going to grow this year and next,” said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute in St Louis. “So I don’t have a lot of faith in Washington this is going to be the best package, but it will be a package.”
Hopes for some progress on tax reform and a solid earnings season helped push the S&P 500 up 2.2 per cent in October. Apple, the largest US company by market capitalisation, will report results after the market closes.
According to Thomson Reuters data, of the 384 companies that have reported earnings, 72.7 per cent have topped Wall Street expectations, compared with a beat rate of 72 per cent over the past four quarters.
The growth expectation for the quarter is 7.7 per cent.
The Dow Jones Industrial Average rose 27.04 points, or 0.12 per cent, to 23,462.05, the S&P 500 lost 3.6 points, or 0.14 per cent, to 2,575.76, and the Nasdaq Composite dropped 11.82 points, or 0.18 per cent, to 6,704.71.
Housing fell 0.79 per cent on the tax plan, which would maintain the deductions for mortgage interest on existing loans and newly purchased homes for as much as $500,000.
The dollar fell to its lowest in a week against a basket of major currencies after the tax details were released.
The dollar index fell 0.09 per cent, with the euro up 0.33 per cent to $1.1655.
Sterling skidded after the Bank of England raised interest rates for the first time in more than 10 years but said it expected only “very gradual” further increases over the next three years.
Sterling dropped 1.1 per cent and was on track for its biggest one-day drop since June, and Britain's main FTSE 100 stock index climbed 0.9 per cent.
The rest of the European Union retreated from the two-year highs hit in the prior session.
The FTSEurofirst 300 index, which is pan-European, lost 0.36 per cent, and MSCI's gauge of stocks across the world shed 0.05 per cent.
Attention will stay on the Fed after it held rates steady on Wednesday and cemented exp-ectations for the third US rate hike of the year in December, with President Donald Trump’s expected nomination of Jerome Powell yesterday to replace Janet Yellen at the Fed’s helm.
Mr Powell is a current policymaker and is seen by Fed followers as a Yellen-style pragmatist who will continue with gradual raises to interest rates.
Benchmark 10-year US Treasury notes last rose 8/32 in price to yield 2.3468 per cent, from 2.376 per cent late on Wednesday.