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Market Risk Rally Cooled By ECB Meeting And Trump Tax Cut Caution

Market Risk Rally Cooled By ECB Meeting And Trump Tax Cut Caution
With caution setting in as the European Central Bank met and unconvincing U.S. tax cut plans cooling investors' spirits, a record-setting rally in world stocks ran out of steam on Thursday.
After six days of unbroken gains fueled by relief at the outcome of the first round of France's presidential election and encouraging earnings and economic data, traders pulled back and consequently Europe's main bourses were as much as 0.7 percent lower.
Asia felt groggy too. Asia-Pacific shares ended flat a day after hitting their highest in almost two years despite the Bank of Japan offering its most upbeat economic assessment in nine years.
The Canadian dollar and Mexican peso jumped as the U.S. said it would not scrap the North American Free Trade Agreement and a surprise move by Sweden to expand its stimulus program pushed the crown down sharply.
the ECB and what its head Mario Draghi and his colleagues have made of the recent improvement in euro zone economic data is now turning out to be the focus of the markets.
Market reaction to this meeting may hinge on just a few crucial words because the bank is not expected to make any changes to its record low interest rates or mass-stimulus program.
"It is possible that the ECB will remove the language stating that the risks (to the economy) "remain tilted to the downside," said Mike Bell, Global Market Strategist, JPMorgan Asset Management.
After U.S. President Donald Trump's plans offered no details on how they would be paid for despite announcement of plans to slash company tax rates to 15 percent from the current 35 percent and 39.6 percent for small firms.
Trump’s tax plan fueled the suspicion that it could run into opposition from U.S. lawmakers worried about increasing the country's debt levels and amounted to little more than a one-page plan even though it was billed beforehand as the biggest tax cut in history.
"There was virtually no new information, just as expected. He was essentially repeating his campaign promises," said Tomoaki Shishido, senior fixed income strategist at Nomura Securities.
although gains in other cyclical industrials, on the back of strong earnings, kept losses down, the dip in European shares saw them retreat from 20-month highs, with financials and commodity-related stocks the main drag.
Even as its first-quarter net profit more than doubled following a rebound in bond trading, Deutsche Bank shares fell as much as 3.5 percent. However, since worries about its future late last year, its shares have nearly doubled though.
Elsewhere, as more investors piled into the European recovery story, upbeat results from the likes of SKF, Bayer and Subsea 7, companies closely geared to economic growth, were cheered.
As the questions left by Trump's tax plans overshadowed more upbeat earnings, Wall Street futures pointed to a flat start for New York. The S&P 500 ended down fractionally on Wednesday.
While South Korea on Thursday also reported stronger than expected first-quarter growth, fueled by improving global demand, China's growth accelerated at the fastest pace since mid-2015 in the January-March quarter.
Among commodities, though oil prices dipped again on concerns about globally bloated Markets, industrial metals steadied.

Christopher J. Mitchell

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