LONDON: Global stock markets hit record highs on Monday on expectations that a US tax bill could soon pass, though a more cautious reading of the draft law’s prospects by currency traders put the dollar under pressure.
Top US Republicans said on Sunday they expected Congress to pass the tax code overhaul this week.
Global stock markets have surged this year, in part on anticipation of the reform, which is seen boosting corporate profits and triggering share buy-backs and higher dividend payouts.
The benchmark MSCI World index, which tracks shares in 47 countries, rose 0.45 per cent on Monday to hit a record high, putting it on course for its best year since 2009.
Index futures pointed to a higher open for US stock markets. Dow Jones and Nasdaq futures were both up 0.5 per cent, with S&P 500 futures up 0.3 per cent. All three indices hit record highs on Friday.
The pan-European Stoxx 600 index was up 0.9 per cent, less than 2 per cent off a two-year high hit at the start of November Germany’s DAX index rose 1.6 per cent, with the U.K.’s FTSE 100 up 0.4 per cent.
With little in the way of major economic data this week, the tax bill was likely to remain in focus for stock market investors, according to Mike van Dulken, head of research at Accendo Markets.
“Ahead of bill being signed into law, any more updated guidance from US corporates, showing potential earnings improvement from the reform, will be closely watched,” he said.
The dollar index fell 0.2 per cent against a basket of major currencies, however, with strategists saying forex traders had adopted more of a wait-and-see attitude to the bill.
In fixed income markets, Portuguese bonds were the standout performers, with yields hitting their lowest since early 2015 after an unprecedented two-notch sovereign credit upgrade from Fitch.
Friday’s shift means the country now holds an investment grade from two of the three major rating agencies and could soon return to major bond indices.
Portugal’s ten-year bond traded decisively below its Italian equivalent on Monday. The last time it did so for a sustained period was in early 2010.
“There is very much a shift in the architecture in the European government bond market,” said DZ Bank rates strategist Daniel Lenz.
In Asia, the Indian rupee fell as much as 1.1 per cent before reversing all its losses to trade up 0.26 per cent, as it became clear that Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) would comfortably win an election in his home state of Gujarat.
Futures of soaring cryptocurrency bitcoin received a lukewarm reception at their launch on the CME Group exchange late on Sunday. The front-month contract dropped as much as 6 per cent before recovering to trade up 1.3 per cent.
Oil prices rose amid an ongoing North Sea pipeline outage and as a strike by Nigerian oil workers threatened the country’s crude exports.
— Reuters
