Aurelia Butler

(Reuters) – U.S. company executives are talking much more about the upcoming presidential election than they did four years ago as a wider policy rift between candidates Kamala Harris and Donald Trump raises questions around taxes, tariffs and pricing power.In company earnings calls over the two months ended Aug. 15, mentions of “election” or “White House” were 34% higher than the corresponding period in 2020, according to an LSEG Workspace screen of S&P 500 companies. After energy and carbon emissions, including renewables and electric vehicles, the Inflation Reduction Act (IRA), tariffs and trade were the most talked about policy topics by companies which cited “elections” during second-quarter earnings, according to a separate analysis by FactSet.Sharper policy differences between the two candidates now than during the 2020 race may be spurring the heightened discussion of the election on earnings calls, said Sam Stovall, chief investment strategist at CFRA Research.”Company profits could be affected materially, depending on which party gains the White House, and especially if it is either a blue or red wave,” Stovall said.Harris’ surprise rise to the top of the Democratic ticket following President Joe Biden’s exit from the race in late July has added another layer of uncertainty, investors said.”We have an idea as to what Trump is planning, but we have less clarity on Harris’ plan. We have a belief that it’s going to be somewhat continuation of the Biden administration, but a little different,” said Robert Pavlik, senior portfolio manager at Dakota Wealth Management.Republican nominee Trump has been loud about his intention to go big with trade restrictions, vowing to impose tariffs of 60% or higher on all Chinese goods. He has also floated the idea of a 10% universal tariff.Tariffs and taxes are most relevant to U.S. equity fundamentals, Citi Research said in a note, and higher corporate taxes pose a bigger risk to earnings than tariffs do.”It all comes down to taxes… that’s the rally killer for this market,” said David Wagner, portfolio manager at Aptus Capital Advisors. “The new corporate tax rate is an instant haircut to earnings growth. That’s why a lot of these companies are really starting to talk about this to get ahead of the curve.”Harris is proposing to increase the corporate tax rate to 28% from 21% if she wins the November election. Trump, who slashed the rate to 21% from 35% during his term and implemented other tax breaks set to expire next year, has pledged to make the cuts permanent. The closeness of the presidential race – an Ipsos poll conducted Aug. 2-7 showed Harris leading Trump 42% to 37% – makes it difficult for companies to start positioning for a particular outcome.On companies or people stocking up in advance of potential tariffs, U.S. chemicals maker Dow Inc (NYSE:DOW)’s CEO James Fitterling said, “I don’t think anything has started yet… primarily because there’s all the uncertainty around the election and what policies are going to actually stick.”Still, some firms have laid out some plans on how they will respond to the election outcome. Cosmetics company Elf Beauty’s CEO Tarang Amin said the firm would raise prices as it passes on the cost from higher tariffs, should Trump win.”We don’t like 60% tariff just because we feel it is a tax on American consumers,” Amin said.Sharpie pen maker Newell Brands is moving some production of kitchen appliances out of China amid tariff uncertainty, CEO Chris Peterson told Reuters. The election’s outcome may have big implications for companies in the energy and electric vehicle sectors.On energy, Harris is largely expected to adhere to Biden’s policies and supported his landmark IRA, while Trump is expected to undo much of it.Trump has also said he would consider ending a $7,500 tax credit for electric-vehicle purchases.Their ability to push through policies will also depend on securing the backing of Congress.”The key will be who controls the House and the Senate, irrespective of who is the president,” said Thomas Hayes, chairman and managing member at Great Hill Capital, LLC. More

Initial claims for state unemployment benefits rose 4,000 to a seasonally adjusted 232,000 for the week ended Aug. 17, the Labor Department said on Thursday. Economists polled by Reuters had forecast 230,000 claims for the latest week.The latest data should continue to allay fears that the labor market is rapidly deteriorating, first raised after a much sharper than expected slowdown in job gains in July, which also saw the unemployment rate rise to a post-pandemic high of 4.3%.Federal Reserve officials have said they are keenly watching the labor market, aware that waiting too long to cut interest rates could cause serious harm. Layoffs remain historically low, however, with much of the slowdown in the labor market coming from firms scaling back hiring, trailing an immigration-induced surge in labor supply. The Federal Reserve’s 525 basis points worth of rate hikes in 2022 and 2023 are curbing demand.The U.S. central bank has kept its benchmark overnight interest rate in the current 5.25%-5.50% range for more than a year but is now widely expected to begin a rate-cutting cycle at its next policy meeting on Sept. 17-18.The number of people receiving benefits after an initial week of aid, a proxy for hiring, rose 4,000 to a seasonally adjusted 1.863 million during the week ending Aug. 10, the claims report showed. More

The ECB left rates unchanged at that meeting and gave almost no hint about its future policy moves but the accounts reveal concerns about restricting economic growth too much and show increasing comfort that bringing euro zone inflation down to the 2% target was on track.”A gradual attenuation of policy restriction was a balancing act, as it was also important not to unduly harm the economy by keeping rates at a restrictive level for too long,” the accounts showed. “It was … important to keep an eye on the real economy.””The September meeting was widely seen as a good time to re-evaluate the level of monetary policy restriction,” the ECB added. “That meeting should be approached with an open mind”The ECB was among the first major central banks to cut rates in June and euro zone economic data in the past six weeks have largely supported the case for further easing.Growth in negotiated wages, a key metric to gauge future price pressures, slowed sharply in the second quarter, while economic growth has been anaemic with Germany, the bloc’s biggest economy, skirting a recession. That is why markets now see a more than 90% chance of a 25-basis-point rate cut next month, followed by at least another step this year, possibly in December.”While there could still be upside surprises to wage growth later in the year, today’s wage growth reading makes a September cut by 25bp even more likely,” ING economist Bert Colijn said.The ECB has long been concerned about rapid wage growth but the accounts suggest that policymakers are becoming more relaxed.”It was comforting to see that domestic cost pressures from high wage growth, including in the services sector, had been increasingly buffered by unit profits,” the accounts showed.Policymakers also thought that inflation was well on its way back to target and inflation was progressing along its long-outlined criteria, putting price growth back at 2% by the end of next year. More

“We’ve got some data sets to come in before September,” Schmid said in an interview with broadcaster CNBC at the start of the annual global central bankers’ conference hosted by the regional Fed bank in Jackson Hole, Wyoming, in reference to the Fed’s next policy meeting on Sept. 17-18. “It bears looking harder at it,” he said of the unemployment rate. “I’m going to let the data show where we lead…I would agree with several of my colleagues that you probably want to act maybe before (inflation) gets to two (percent) but that sustainability to two I think is really important.”The U.S. central bank is widely expected to begin reducing its benchmark policy rate at its upcoming meeting, with most Fed officials buoyed by encouraging inflation data and increasingly anxious about the health of the job market. More

September futures on the S&P/TSX index were unchanged at 0.0% at 6:51 a.m. ET (10:51 GMT).Materials shares will be in the spotlight as gold prices fell on a firm dollar, while copper prices rose. [GOL/] [MET/L]The energy sector will also remain in focus as oil prices edged higher. [O/R] The S&P/TSX composite index notched a record high in the previous session, boosted by tech shares on increased prospects of lower borrowing costs globally. Minutes from the U.S. Federal Reserve’s July policy meeting showed on Wednesday a “vast majority” of policymakers said a September rate cut would be likely.Data-wise, investors will now parse through weekly jobless claims and purchasing managers index (PMI) surveys out of the United States, which can shed more insight into the health of the economy.However, the event of the week will be Fed Chair Jerome Powell’s speech at the Jackson Hole Economic Symposium on Friday.Traders will follow the commentary for hints of the Fed reducing U.S. interest rates next month, where market participants are pricing in a 69.5% chance of a 25-basis points cut.In Canada, investors geared up for bank earnings, started by Toronto-Dominion Bank that reported a quarterly loss. Canadian National Railway (TSX:CNR) and Canadian Pacific (NYSE:CP) Kansas City shut down their rail networks in the country and locked out about 10,000 workers after labor talks with the Teamsters union failed.COMMODITIES Gold: $2,507.40; -0.18% [GOL/]US crude: $72.14; +0.29% [O/R]Brent crude: $76.37; +0.42% [O/R]FOR CANADIAN MARKETS NEWS, CLICK ON CODES:TSX market report (TO)Canadian dollar and bonds report [CAD/] [CA/]Reuters global stocks poll for CanadaCanadian markets directory($1 = 1.3579 Canadian dollars) More

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