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Five things you need to know on Thursday

All eyes on Fed transition, UK prepares for the worst on Brexit, and Wall Street earnings season kicks off.

Here are some of the things people in markets are talking about today.

Who and when?

There are two big questions facing the Federal Reserve at the moment. The September meeting minutes published yesterday didn’t shed much light on the first: the timing of the next interest-rate rise. Some Fed officials expressed concern that low inflation was more than a temporary phenomenon, causing a slip in the dollar as investors interpreted the pronouncements as more dovish than had been expected. The second question — who will take over as Fed chair — remains hotly debated, with Kevin Warsh now the favourite, according to a Bloomberg survey of economists. Nobel Prize-winning economist Paul Krugman this week strongly dismissed Warsh’s credentials.

Prepare for the worst 

The continuing lack of progress on talks aimed at finding agreement on the UK’s exit from the European Union means that policy makers in London are starting to make preparations for a so-called ‘hard Brexit.’ Chancellor of the Exchequer Philip Hammond said that he would start to release more money for a ‘no deal’ scenario in early 2018 if meaningful progress is not made by then. Pound traders are getting ready for a bumpy end to the year, with demand for out-of-the-money options rising to the highest in two months.  

Earnings season

JPMorgan Chase & Co and Citigroup get third-quarter Wall Street earnings season underway today. Expectations have been managed lower ahead of the release, with executives at the banks warning on revenue declines.

Markets ease higher

Overnight, the MSCI Asia Pacific Index rose 0.5% to a fresh ten-year high, while Japan’s Topix index added to decade-highs to close with a 0.2% gain. In Europe, the Stoxx 600 Index gained 0.1% by 5:45am as the Catalan crisis continued to dominate. S&P 500 futures slipped 0.2%, the 10-year Treasury yield was 2.337% and gold was at $1 294.74 an ounce. Possibly to the discomfort of JPMorgan chief executive officer Jamie Dimon, who dubbed Bitcoin a “fraud” last month, the cryptocurrency surged to a fresh record above $5 000 this morning, and was trading at $5 148 at 5:45am Eastern Time. 

Read: Bitcoin climbs above $5 000

Tax changes

President Donald Trump is rethinking state and local tax issues in his fiscal proposal after he found out they would hit some middle-income earners, according to two people familiar with his thinking. Independent analysis found the current proposal would actually raise taxes on almost a third of those earning $50 000 to $150 000 per year. The president promised his proposal would “breathe new life into struggling industries and forgotten towns,” in a speech to a group of truck drivers in Harrisburg, Pennsylvania yesterday as the debate continues over whether tax cuts, or Trump’s other campaign promise of increased infrastructure spending, would be best for US growth. 

© 2017 Bloomberg

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