Dollar, stocks get lift from tax move; bonds fall
Rise in metals leads mining shares higher; euro weakens
The dollar climbed and Treasuries fell after the latest developments in Washington buoyed optimism about tax reform and odds rose that an insider may become the next US Federal Reserve chief. European stocks edged higher on the back of rising metal prices and positive corporate earnings.
Miners gave a boost to the Stoxx Europe 600 Index as industrial metals gained, while better-than- expected results from companies including Volvo AB and Ericsson AB helped sentiment. The greenback strengthened after a US Senate budget resolution gave impetus to President Donald Trump’s planned tax cuts. The euro slipped while investors awaited the next move in Spain, and the yen fell ahead of Japan’s election. Gold dropped along with European bonds as safe havens lost favour. WTI crude fell as concern over Iraqi supplies waned. US stock futures point to a higher open.
Investors are eyeing political developments in Spain, the decision on a Federal Reserve chair that may sway the path of US interest rates, and Brexit negotiations, suggesting caution as markets head into the weekend. But Thursday’s bout of volatility dissipated quickly as tax-cut optimism took hold. The CBOE Volatility Index, which surged as much as 17 per cent on Thursday, ended the day little changed and fell on Friday.
Politico reported that Trump is leaning toward Jerome Powell, a member of the Fed Board of Governors, to take over from Janet Yellen, while people familiar with the process said the president’s advisers are steering him toward either Powell or Stanford economist John Taylor.
Meanwhile, officials in Madrid are finalising plans for taking control of Catalonia as leaders of the rebel region plan a unilateral declaration of independence. The Spanish government’s plan will be rubber-stamped at an extraordinary cabinet meeting on Saturday when Prime Minister Mariano Rajoy returns from a summit in Brussels, where he’s looking to shore up his support among European leaders.