Amid a quiet economic calendar today, the financial markets will likely be preoccupied with events from last week and especially the weekend for the time being.
For starters, US Treasury Secretary Janet Yellen finally delivered on her promise of a minimum international tax. Her proposed minimum tax of 15% on the earnings of companies that operate internationally was accepted this weekend at a G7 meeting.
The seven largest economies in the world agreed that they will tax multinational businesses in this manner, as long as their profits are over 10%, which for now is proving to be a slightly confusing condition.
Still, the tax is going to target companies like Alphabet (Google), Amazon, and Facebook, which gather earnings from many countries in the world but have on occasion benefited from lower tax rates, depending on where they are registered to report their earnings.
The decision to embrace an international minimum tax is but the first step in a long process, which would require support at this summer’s G20 meeting, as well as larger cooperation between more countries, for instance, within the Organization for Economic Cooperation and Development.
Though it’s big tech names that are going to be the most likely targets of this tax, we don’t expect to see their stock affected significantly at present because there are still many question marks as to how this form of taxes would work in practice.
Stock indices will likely trade slightly lower today, but not due to the G7 tax deal. Instead, we are seeing a slight correction after last week’s impressive optimism amid stock indices, further fueled by Friday’s disappointing NFP report from the United States, which confirms that the Federal Reserve will have to stay dovish.
In addition, US stock indices are likely to trade cautiously this week due to the upcoming CPI data reports, this week’s most interesting and influential publication.
Meanwhile, oil prices have retreated from the two-year maximums they reached last week in light of Iran restarting talks regarding its nuclear deal this week. If the negotiations go well, Iran will once more be able to sell oil internationally, which will significantly increase supply and upset the balance OPEC+ has so carefully worked to preserve these past few years.
As a result of the nuclear deal apprehension, Brent crude dropped to $71.25, while the WTI reached $69.05 per barrel.
