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From #Panama to #ParadisePapers - EU eyes blacklist

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European Union countries had already been looking to agree a blacklist of tax havens after last year's Panama Papers revelations on offshore wealth, but the latest set of leaks pointing to potential cases of tax avoidance on a mass scale is adding urgency to that drive.

EU finance ministers have brought forward to today (7 November) a discussion on measures, including an EU-wide list of tax havens, intended to discourage the rerouting of profits made in the EU to tax-free or low-tax countries. At the moment, each EU state has its own list of jurisdictions that are seen as less co-operative on tax matters, but the idea is that a single, EU-wide one would carry more weight. However, the issue is complex and the political will to act fast is not uniformly there: a final decision is certainly not expected today.

The narrative about how Italy's Matteo Renzi was gradually consolidating a triumphant return to power next year after his 2016 resignation as PM is looking decidedly shaky. Instead, it is former premier Silvio Berlusconi who looks more like the comeback kid, with his rightist bloc now claiming victory in Sicily's bellwether regional election at the weekend.

There were plenty of local factors - an influx of immigrants to the island being just one of them - but the result puts Berlusconi back on the political map after years of sex scandals and graft allegations and raises big questions about Renzi’s leadership of the fractured centre-left. Critics within his PD party may now try to mount a challenge to him.

It could be an important moment in the Catalonia stand-off today with the formal deadline for parties to announce whether they will be running joint tickets for a Dec. 21 regional election that many now want to see as a de facto referendum on independence. The big question is whether the pro-secession parties can paper over the cracks and come together for a joint campaign.

Once again, there has been little or no global markets impact from an outsize political risk – this time the high-stakes Saudi corruption crackdown and upping of regional military tensions.

The exception has been a surge in Brent crude oil prices above $64 to the highest in more than two years, but that has only served to lift big cap energy stocks and oil exporters worldwide with little impact on inflation expectations in bond markets, even though energy prices are now up almost 40 percent year-on-year. In fact, as markets brace for another Federal Reserve interest rate rise next month, the 2-10 year U.S. yield curve continues to flatten to its lowest level in 10 years.

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And so global equities continue to push ever higher. On course for its ninth straight daily gain, MSCI’s index of world stocks set an all-time high early on Tuesday, after all three main Wall St indices closed at record highs last night.

Japan’s Nikkei hit yet another 21-year high, regional Asia bourses clocked their highest in 10 years and MSCI’s emerging markets equity index pushed up to its best level since 2011. Caught in that slipstream and boosted independently by double-digit euro zone corporate earnings growth in the third quarter so far,  European stocks are expected to rise about 0.3 percent at the open.

For all the ifs and buts about the seemingly never-ending bull run in equities, in the words of the Sentix research group on Monday (6 November): “The global economy is booming.” Global markets aside, the financial reverberations from the Saudi purge have been higher locally, with Saudi’s main stock index down about 1% on Tuesday amid losses across all other Gulf bourses.

Shares in Saudi companies linked to people detained in the anti-corruption probe continued sliding in early trade. Prince Alwaleed bin Talal’s Kingdom Holding sank 2.8%, having lost 15% over three days. Al Tayyar Travel, whose founder, Nasser bin Aqeel al-Tayyar, was also held, tumbled 7 percent after Monday’s 10% plunge.

Lebanon’s sovereign bonds fell sharply on Monday after the Prime Minister al Hariri suddenly stepped down at the weekend and headed to Riyadh and amid bellicose Saudi comments overnight about military tensions between the two countries. More broadly, currency markets were mostly stable, with the dollar index higher in early trading as traders eye slow progress among U.S. Republican party tax negotiators working on a tax cut deal. Euro/dollar was down slightly below $1.16 in early trade.

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