HONG KONG, China (AFP) — Asian markets took a step back Thursday after a four-day rally, tracking a weak lead from Wall Street, as traders assess the chances of Congress passing Donald Trump’s massive tax cuts.
As expected, the administration unveiled plans to slash corporate and individual rates but there were few details and there are questions over how the measures will be paid for.
The proposals are part of a wide-ranging plan to fire up the world’s top economy, which also includes ramping up infrastructure spending and wiping away business regulations.
“Under the Trump plan, we will have a massive tax cut for businesses and massive tax reform and simplification,” US Treasury Secretary Steven Mnuchin said at the White House.
Trump’s election in November sparked a surge in global markets as traders bet the proposals would fuel US growth.
But the president has already failed to push through a key healthcare reform — despite Republicans controlling Congress — and analysts say he could have trouble pushing through his tax agenda.
“Traders are viewing (the plan) as little more than a road map, rather than the much ballyhooed ‘big announcement’, because the statement did not provide any comprehensive details,” said Stephen Innes, a senior trader at OANDA.
“While the essence of the proposal is reflationary… the argument remains for, and further clarity is required on how, the tax cut’s deficit ramifications will be offset. Fiscal reforms present a real revenue drain amidst disquieting concerns of the current trajectory for the US deficit.”
NAFTA revision talks
Investors in New York were unsure about the measures and decided to cash out after two days of gains.
And their Asian colleagues followed suit Thursday. Tokyo was down 0.2 percent by the break after four days of gains, while Hong Kong dropped 0.3 percent, Seoul eased 0.3 percent and Sydney was also lower.
Taipei, Manila and Jakarta all turned down.
Investors are now awaiting the end of a two-day Japanese central bank meeting later Thursday, followed by the European Central Bank later in the day.
The Mexican peso and Canadian dollar bounced back from early selling after the White House said Mexico, Canada and the US plan to renegotiate their NAFTA free-trade deal.
Trump “agreed not to terminate NAFTA at this time and the leaders agreed to proceed swiftly… to enable the renegotiation of the NAFTA deal”, a statement said.
The announcement came hours after reports said Trump was considering giving notice that he was pulling out of the pact.
Canada’s dollar has tumbled this week after Washington slapped 20 percent tariffs on the country’s softwood lumber imports, fanning fears of a trade war.
The tycoon has in the past hit out at NAFTA, as well as other deals the US has signed globally, leading to worries about a worldwide trade war.
Key figures at 0230 GMT
Tokyo – Nikkei 225: DOWN 0.2 percent at 19,243.76 (break)
Hong Kong – Hang Seng: DOWN 0.3 percent at 24,503.43
Shanghai – Composite: DOWN 1.0 percent at 3,109.51
Euro/dollar: UP at $1.0908 from $1.0905 at 2100 GMT
Pound/dollar: UP at $1.2850 from $1.2849
Dollar/yen: UP at 111.35 yen from 111.00 yen
Oil – West Texas Intermediate: DOWN 26 cents at $49.36 per barrel
Oil – Brent North Sea: DOWN 21 cents at $51.61
New York – Dow: DOWN 0.1 percent at 20,975.09 (close)
London – FTSE 100: UP 0.2 percent at 7,288.72 (close)
© Agence France-Presse
