After the news broke out that substantial progress has been made on a tax reform that will have a great likelihood of coming to fruition, the stock market has reacted positively with a significant surge. On Tuesday, the market moved up to chalk up its best performance since the month of April. Witnessing this rally, experts have said that there is a positive sentiment in the markets and that is a definite plus particularly because of the pressure that has been seen in recent times owing to the North Korea- U.S. tensions.
Reports have trickled in that there is a 'broad consensus' among top Republican leaders on the tax issue and this could pave the way for a firm tax plan in place soon. There is also speculation that both individual and corporate tax may be reduced through this plan. Further, the plan will also make way for the bringing back of overseas corporate profits which will boost infrastructure building and investment. All of these conjectures have served to shore up the U.S. stock market quite significantly.
However, the likelihood of the tax reform coming into place this year still seems to be low. There are a number of hurdles that will have to be crossed before a new tax bill is passed and the first of these will be to garner support from within the party. This appeared to be an impossible task until now, but now indications are that it may be possible to bring in more key Republicans in support of the draft that is currently being mulled upon.
The impact of the news that a tax plan may soon be finalized has not just impacted the U.S. stocks but also had a worldwide implication. In Asia, the stock market posted mixed closing after the news broke out but the pressure was seen on stock values thanks to the President's comments on the NAFTA deal. This pressure is likely to hold for some time as the NAFTA is significant for this region of the world.
In Tokyo, the yen stood firm albeit with moderate gains and the benchmark Nikkei posted a 0.3% gain. Singapore went against the tide with a dip of 0.1% and Shanghai followed suit with a 0.1% dip. In Sydney, the dip was more pronounced, with a 0.2% change. A typhoon in Hong Kong made its presence felt on the market as well and the stock market remained closed.