Markets Insights

Trump's healthcare Bill woes to test market

Protesters at a rally against Mr Trump's healthcare reform Bill in Washington last Thursday. With the Bill's withdrawal, markets are more concerned with whether the administration can overhaul the tax code and implement tax cuts and infrastructure sp
Protesters at a rally against Mr Trump's healthcare reform Bill in Washington last Thursday. With the Bill's withdrawal, markets are more concerned with whether the administration can overhaul the tax code and implement tax cuts and infrastructure spending.PHOTO: AGENCE FRANCE-PRESSE

Some analysts worry it could be a bad sign for the rest of his agenda, including tax reform

The spectacular failure of President Donald Trump's first major legislative test - on healthcare reform - is set to be a key theme on global markets early this week.

Some market observers worry that the Bill's withdrawal could be a bad sign for the rest of Mr Trump's agenda - including tax reform.

The Dow Jones Industrial Average lost 0.3 per cent on Friday, ending the week 1.5 per cent lower - its biggest decline since September.

Investors will likely turn their attention to the tax reform plan, which had been reliant in part on savings which were to have been achieved by the healthcare reform Bill. However, market observers are mixed in their views over the failure of the Bill to garner enough support among Republican legislators.

"The rejection of the healthcare Bill could cause markets to question the credibility and capability of the Trump administration to implement tax reform and infrastructure spending," CMC Markets analyst Margaret Yang said.

But remisier Alvin Yong disagreed. "Even if the healthcare reform Bill can't go through, there's more consensus on tax reform."

WHY SOME ARE WORRIED

The rejection of the healthcare Bill could cause markets to question the credibility and capability of the Trump administration to implement tax reform and infrastructure spending.

CMC MARKETS ANALYST MARGARET YANG

Financial markets are more concerned with whether the Trump administration can overhaul the tax code and implement tax cuts and infrastructure spending. The prospects of these moves have fuelled the business community's support for the Trump presidency, as well as the US stock market's recent charge to record highs.

Also on traders' radar will be British Prime Minister Theresa May's filing of "divorce" papers, due on Wednesday, to trigger Article 50 of the Treaty on European Union for Britain to leave the EU. This step is expected to launch two years of complex negotiations that will pit Britain's desire for a trade deal against the bloc's view that Britain must not benefit from Brexit.

IG market strategist Pan Jingyi expects that markets "may have more to work on as talks on the UK's departure begin". More volatility is expected in trading of the sterling and the euro against the greenback as the currencies react to the impending divorce, she said.

Another key global issue likely to feature this week is the outcome of a meeting yesterday in Kuwait of Opec and its allies to review the impact of their output cuts agreed on Dec 10. Opec achieved 91 per cent of its pledged cuts last month, while Russia and other allies delivered about 44 per cent, according to data from the International Energy Agency.

Oil prices were under pressure last week at about US$50 on rising US crude stockpiles. This leaves open the question as to whether the persistent glut requires curbs to be extended beyond the summer. Opec ministers will meet on May 25 in Vienna to decide whether to extend the deal.

Local oil and gas stocks may remain under pressure on rising US supply and concerns of fallout from Ezra Holdings' bankruptcy.

"The inventory build-up is the result of lower crude demand in the first quarter and US shale production, driven by a recovery in shale drilling in recent months," according to DBS Group Research.

But the oil and gas sector is still seen to be on a recovery track, albeit a bumpy one. "Any pullback in oil and stock prices presents opportunities," it said.

A version of this article appeared in the print edition of The Straits Times on March 27, 2017, with the headline 'Trump's healthcare Bill woes to test market'. Print Edition | Subscribe