Originally published by Rivkin Securities
The Dow Jones Industrial Average and S&P 500 had slightly weaker closes on Friday, continuing a downtrend that has persisted for several weeks now. Nevertheless, both indices are still up year to date after a strong run in the first quarter. Just this morning, S&P 500 futures have spiked higher and gold dropped $20 per ounce on the news that Emmanuel Macron has won the first round of the French elections, allaying fears that ‘populist’ Le Pen could win the presidency.
Over in the US, president Trump is due to announce details of his “massive” tax cuts which will likely involve reducing the company tax rate. There is the possibility of a reduction to 15% from the current level of 35% which would obviously improve the after-tax profitability of most companies. Some Australian companies are likely to benefit (those with significant US operations like Macquarie Group Ltd (AX:MQG) and Westfield Corporation (AX:WFD)) if such a cut does eventuate. One would be forgiven for taking the current announcement with a grain of salt, however, considering Trump’s tendency for hyperbole and one would be wise to wait for the announcement on Thursday before jumping to any conclusions.
Also on Friday night, WTI oil slipped back below the $50 per barrel level, amid concerns that the lack of inventory drawdown since the OPEC production cuts is a sign that the cuts are not enough to rebalance supply and demand and put a floor under prices. OPEC will soon have to decide whether to extend the cuts for a further period as the term of the first cut agreement comes to an end in June.
S&P/ASX 200 futures are pointing to a flat open this morning despite the jump in US equity futures prices.