Will US GDP Provide Bright Spark on an Otherwise Downbeat Day

• Amazon earnings weigh on sentiment;

• Obamacare “skinny repeal” fails to get past the Senate, threatening tax reform and spending;

• US and Canadian GDP releases eyed, as well as Kashkari comments.

Financial markets are set to open on a more downbeat note on Friday, with earnings from Amazon on Thursday being blamed for the initial underperformance along with the US Senate’s inability to pass the “skinny repeal” of Obamacare.

While Amazon’s results may only be responsible for some short term negativity, with the tech sector as a whole still enjoying a remarkable year, the failure in the Senate could pose further problems for President Donald Trump and his growth agenda. It’s generally believed that the repeal of Obamacare will unlock the ability to cut taxes, a key policy of Trump’s during the campaign and one that was partly responsible for such a strong post-election rally in equities, the dollar and rates.

Equity markets have been rather resilient to the delayed approval of tax cuts and spending measures that were intended to boost growth in the world’s largest economy, from the currently below par levels. This has been aided by healthier earnings, as we’ve once again seen for the second quarter, despite the occasional blip, as we had with Amazon. Today is looking a little quieter but we will get numbers from Exxon Mobil, Merck and American Airlines, among others.

Friday is also looking a little quieter on the economic data side as well, with US and Canadian second quarter GDP the only notable releases. The US will be of particular interest, with expectations currently for quite a sizeable upward revision to 2.5% which would make the first half of the year not the shambles it first appeared. With inflation and jobs data still to come next week, it could also act as another incentive for the Fed to pursue another rate hike this year – although that’s unlikely to come until December – with policy makers comfortable with the path the economy is on.

We’ll also hear from Neel Kashkari later on today, a voter on the FOMC and arguably its most dovish member. While his comments will be of interest, being one of the few doves among a committee who’s consensus is still to tighten does mean his comments possibly carry less weigh, as far as traders are concerned.