World Week Ahead: US tax reform, corporate earnings, French election

A slew of US corporate earnings including those of Alphabet and Amazon, US President Donald Trump's "big announcement" on tax reform, as well as central bank meetings in the eurozone and Japan will form a key focus this week.

Investors will also parse the results of Sunday's first round of voting in France's presidential election to gauge the stability of the European Union.

"The election of either [far-right candidate Marine] Le Pen or [far-left candidate Jean-Luc] Melenchon would put Paris on a fast-track collision course with [EU officials in] Brussels," James Shields, professor of French politics at Aston University in Britain, told Reuters.

"The election of Marine Le Pen would make Brexit look trivial by comparison," Shields noted.

Le Pen wants France to drop the euro and return to the franc.

The second round of voting in France between the two candidates who take the most votes this weekend is set for May 7. Most polls will close at 8pm local time on Sunday in France.

Trump last Friday unexpectedly promised that a "big tax reform and tax reduction will be announced next Wednesday."

US Treasuries pared earlier gains on Friday, as a result.

"The Treasury market is apparently far less convinced of the veracity of the political pledges this round," BMO strategists Ian Lyngen and Aaron Kohli wrote in research note, Bloomberg reported.

The announcement will consist of "broad principles and priorities," an administration official, who asked not to be identified, said on Saturday, Reuters reported.

Trump's ability to conclude a tax deal has been hurt by the failed effort to agree with Congressional Republicans on revamping Obamacare.

Last week, the Dow Jones Industrial Average rose 0.5 percent, while the the Standard & Poor's 500 Index gained 0.9 percent, and the Nasdaq Composite Index rallied 1.8 percent, bolstered by better-than-expected corporate earnings.

Other US companies reporting their latest quarterly results in the coming days include Microsoft, Intel and Exxon Mobil.

The latest economic data will arrive in the form of reports on the Chicago Fed national activity index and the Dallas Fed manufacturing survey, due today; the FHFA and S&P Corelogic Case-Shiller house price indices, new home sales, consumer confidence, and the Richmond manufacturing index, due Tuesday; durable goods orders, international trade in goods, weekly jobless claims, pending home sales index, and the Kansas City Fed manufacturing index, due Thursday; and GDP, employment cost index, Chicago PMI, as well as consumer sentiment, due Friday.

US Federal Reserve officials scheduled to speak this week include Neel Kashkari today as well as Lael Brainard and Patrick Harker on Friday.

In Europe the Stoxx 600 Index retreated 0.6 percent last week.

Charles Gave, founder of Hong-Kong based asset-allocation consultancy GaveKal Research, who predicted the win of Trump, now predicts a victory for Le Pen in the French presidential elections, Bloomberg reported.

"Le Pen's momentum is a slow-moving reaction against the men of Davos - as we have seen with Brexit and Trump - but markets don't want to believe it," Gave told Bloomberg ahead of the first round of voting.

The latest eurozone data slated for release this week include reports on Germany's IFO business climate, due today; Germany's GfK consumer confidence and consumer price index, and euro-zone economic confidence, due Thursday; and German retail sales and import price index, as well as the euro-zone CPI, due Friday.

(BusinessDesk)