LIVE MARKETS-US budget bill to cushion corporate earnings from higher tariffs - BofA

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US BUDGET BILL TO CUSHION CORPORATE EARNINGS FROM HIGHER TARIFFS - BOFA

Cool heads have prevailed in markets around the world in recent weeks despite ongoing tariff woes, and Bank of America equity strats attribute the tranquillity to the prospect of near-term US fiscal support.

MSCI's all country world index .MIWD00000PUS is at record highs, up a further 0.6% this week, and that is despite Trump ramping up his tariff threats.

"The continued robustness in global macro data and the expectation that tariff threats may not be followed through have buoyed the market's mood," write the BofA team.

"...but the passage of the One Big Beautiful Bill Act (OBBBA) - and thus the hope for renewed US fiscal stimulus - has also been a key support factor."

BofA economists expect the bill will result in only a neutral fiscal impulse, however on a positive note there are hopes it could result in a near-term $100bn cash-flow boost for corporates.

A boost of that size is equal to about 3% of U.S. corporate profits, says BofA, a pertinent point as it would serve a buffer to margins hit by sharp increases in tariff payments.

Nevertheless, they flag some major downsides to U.S./global growth.

The risks include "a further rise in the effective tariff rate, the impact of trade uncertainty on corporate spending, weakening immigration dynamics and the recent negative turn in the US fiscal impulse."

(Lucy Raitano)

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