Political uncertainty returns as Catalonia declares the right to statehood
Spain has become the centre of the latest political uncertainty, as Catalans went to the polls for an independence referendum on Sunday. The vote was sanctioned by the regionally devolved government but not recognised by the state parliament in Madrid. As a result, national police forces were instructed to disrupt voting and close polling stations. The turnout was reported as being 42.3% with 90% voting for independence. It is highly unlikely that this is a true representation of the views of the Catalonian population given the disruption, declared illegality and opportunity for abuse. However, this has not stopped the Catalan leader Carles Puigdemont saying that the Spanish region has “won the right to statehood.” This is unlikely to be the end of the issue, and the current situation has the potential to escalate.
US economic growth accelerated faster than previously thought during the second quarter. The Commerce Department revised its observation to an annualised rate of 3.1% during the three months to June, up from the previous estimate of 3%. This itself was revised up from an initial estimate of 2.6%. This is now the fastest rate of growth recorded by the US in two years and above the average rate achieved since the financial crisis. Growth was predominately driven by accelerations in consumer spending and government expenditure. However, the faster growth is following a weak start to the year and a disappointing performance in 2016. The full year figure is expected to remain at around the trend rate of 2-2.5%.
Following a series of disappointments, it appears that Donald Trump’s latest tax plan will have a strong likelihood of getting through Congress. However, the process is likely to take several months and the plan passed into law may vary from the initial proposal. The plan includes significant tax cuts for both corporations and individuals. Markets have focused on the potential reduction in corporation tax from the current 35% to 20% as well as a halt to the taxation of the overseas earnings of US corporations. Furthermore, there will be a one-time holiday on overseas earnings repatriated, to be taxed at 10%. In aggregate, if the plan becomes law, there would be an immediate increase in post-tax profits and an inflow of large amounts of hoarded overseas cash that would likely be used for increased dividends, share buybacks, business investment, and acquisitions.
|UK 10 Year Gilt Yield||1.35||1.365||0.015||1.11%|
US non-farm payrolls and unemployment rate for September will be released on Friday as well as revised figures for July.