Stocks little changed with US tax plan in focus; dollar dips

Oil prices climb on tension over Iraqi Kurdistan; gold hits 6-week low

NEW YORK, Sept 28, (Agencies): The US dollar edged lower on Thursday after a recent rally and world stock markets were little changed as investors digested prospects for a US tax reform plan proposed by President Donald Trump.

Trump on Wednesday proposed the biggest US tax overhaul in three decades, calling for tax cuts for most Americans, but prompting criticism that the plan favors business and the rich and could add trillions of dollars to the deficit.

“In the US, for stocks at least, it is kind of a hangover from yesterday’s tax news, people still trying to digest that,” said William Delwiche, investment strategist at Baird in Milwaukee.

“From a bond perspective, it is still this idea that the Fed seems very insistent on looking past any sort of shortterm data that we might get between now and December and raising rates,” Delwiche said.

Bets that the Federal Reserve will raise rates once more by year end have firmed this week, following comments from Chair Janet Yellen on Tuesday that the US central bank needs to continue gradual rate hikes despite broad uncertainty about the path of inflation.

Data on Thursday showed the US economy grew a bit faster than previously estimated in the second quarter, but the momentum probably slowed in the third quarter, with activity curbed temporarily following Hurricanes Harvey and Irma.

On Wall Street, equity indexes were little changed after notching solid gains a day earlier.

The Dow Jones Industrial Average rose 29.75 points, or 0.13 percent, to 22,370.46, the S&P 500 gained 0.37 points, or 0.01 percent, to 2,507.41 and the Nasdaq Composite dropped 12.23 points, or 0.19 percent, to 6,441.03.

MSCI’s gauge of stocks across the globe gained 0.07 percent. The panEuropean FTSEurofirst 300 index rose 0.11 percent.

Emerging market stocks lost 0.56 percent, their sixth straight session of declines.

The dollar edged lower against a basket of currencies, on pace to snap a three-day winning streak, as investors looked to take profit on the greenback’s rally this week ahead of the end of the quarter.

The dollar index fell 0.21 percent, with the euro up 0.37 percent to $1.1787.

Most US Treasury yields rose, with the 10-year yield hitting an 11-week peak as investors reduced their bond holdings in the wake of the tax plan that raised concerns about growth in the federal deficit and borrowing.

Benchmark 10-year notes last fell 7/32 in price to yield 2.3317 percent, from 2.309 percent late on Wednesday.

US crude fell 0.44 percent to $51.91 per barrel and Brent was last at $57.44, down 0.23 percent on the day.

Spot gold added 0.3 percent to $1,284.93 an ounce.

US

Gains in McDonald’s lifted the Dow in early afternoon trading on Thursday, while a cooling of the enthusiasm generated by President Donald Trump’s tax plan pressured financial and technology stocks.

Shares in the world’s biggest fast food chain rose 2.57 percent, their biggest single-day percentage gain in more than 2 months, after Longbow Research upgraded the stock to “buy”.

The financial index was the biggest loser among the 11 major S&P sectors, after rising sharply on Wednesday on growing expectations of an interest rate hike in December, also spurred by Trump’s promises to cut taxes.

Technology stocks slipped after gaining for two straight days and Apple’s 0.76 percent fall weighed on the S&P and the Nasdaq.

Trump’s tax plan, which called for tax cuts for most Americans, also drew criticism for favoring business and the rich and potentially adding trillions of dollars to the deficit.

A Commerce Department report showed the economy grew a bit faster than previously estimated in the second quarter, but the momentum probably slowed in the third as Hurricanes Harvey and Irma temporarily curbed activity.

The storms also pushed up initial claims for state unemployment benefits for the week ended Sept. 23, the Labor Department said.

At 12:32 pm ET (1632 GMT), the Dow Jones industrial average was up 48.73 points, or 0.22 percent, at 22,389.44, the S&P 500 was up 1.6 points, or 0.06 percent, at 2,508.64 and the Nasdaq Composite was down 7.62 points, or 0.12 percent, at 6,445.65.

The healthcare index led S&P gainers, rising by a third of a percent.

AbbVie was the biggest boost to the S&P, rising more than 5.6 percent after announcing a global resolution of intellectual property-related litigation with Amgen.

Abbott also rose almost 3 percent after the US FDA approved the company’s glucose monitoring device.

Western Digital fell 2.4 percent after Toshiba said it had signed an $18 billion deal to sell its chip unit to a consortium led by Bain Capital.

Gainers outnumbered decliners on the NYSE by 1,400 to 1,397. On the Nasdaq, 1,462 shares rose and 1,338 fell.

UK

Enthusiasm about US tax reforms and rate hikes dissipated on Thursday, taking the wind out of the sails of Britain’s banking stocks after earlier gains, and leaving the main share index modestly up on the day.

The FTSE 100 index was up 0.1 percent, in line with a broadly flat European market.

British banks pared earlier gains to rise 0.3 percent after the previous session’s advance supported by hawkish rhetoric from the US Federal Reserve earlier in the week and US. President Donald Trump’s plan to reform tax.

Banking stocks have reacted positively to any signs of rising interest rates which would help their margins, but analysts were sceptical of how fast these would materialise.

On the day tobacco group Imperial Brands was the top faller, down 4 percent after it said it would meet profit expectations for the year, though it noted a difficult market.

Europe

A rebound in sentiment after US President Donald Trump unveiled market-friendly tax cut plans proved short-lived as stocks traded mixed on Thursday.

In Europe, equities advanced modestly, while Asian indices struggled to track Wall Street’s Wednesday gains, despite a broad move back to riskier assets like equities.

In European trading, shares in Ryanair fell nearly 4 percent in Dublin as investors came to grips with the lowcost airline cancelling the flights of another 400,000 passengers due to scheduling problems with its pilots.

Market analyst David Madden at CMC Markets UK said the cost of cancelling flights is relatively small in comparison with Ryanair’s annual profits.

London - FTSE 100: 0.1 percent at 7,322.82 points (close)

Frankfurt - DAX 30: UP 0.4 percent at 12,704.65 (close)

Paris - CAC 40: UP 0.2 percent at 5,293.77 (close)

EURO STOXX 50: UP 0.2 percent at 3,561.29

Asia

The dollar extended its gains in Asia on Thursday as focus turned back to the United States after Donald Trump unveiled his market-friendly tax cut plans.

However, regional equities struggled to track Wall Street higher despite a broad move back to riskier assets -as North Korea went on the backburner -- with Treasury yields rising and safehaven gold prices slipping.

After months of waiting Trump released a tax reform blueprint that would slash corporate rates, provide relief for firms that repatriate cash from overseas and reduce the number of tax brackets from seven to three.

The dollar was back above 113 yen in Asia, having briefly broken the level for the first time since July on Wednesday.

The gains in the dollar against the yen helped Japan’s exporters, leaving the Nikkei 0.5 percent higher by the close. There was little impact on Japanese markets after Prime Minister Shinzo Abe officially dissolved parliament, kicking off campaigning for a national election on October 22.

While Sydney and Seoul eked out small gains, Hong Kong, Singapore, Shanghai, Taipei and Wellington were all down.

Tokyo - Nikkei 225: UP 0.5 percent at 20,363.11 (close)

Hong Kong - Hang Seng: DOWN 0.8 percent at 27,421.60 (close)

Shanghai - Composite: DOWN 0.2 percent at 3,339.64 (close)

Oil

Oil prices rose on Thursday, spurred by tension around northern Iraq following the Kurdistan region’s vote in favour of independence in a referendum.

Brent crude was up 55 cents at $58.45 a barrel by 1330 GMT. It hit a more than two-year high of $59.49 on Tuesday after Monday’s referendum vote prompted Turkey to threaten to close the region’s oil pipeline.

US light crude was up 45 cents at $52.59 after reaching a five-month intraday high of $52.86.

“Kurdistan and northern Iraq now export 500,000-550,000 barrels per day (bpd). That would be a big loss to the market,” said Tamas Varga, analyst at brokerage PVM Oil Associates.

Iraqi Kurdistan voted overwhelmingly in favour of independence, prompting Turkish President Tayyip Erdogan to say he could use force to prevent the formation of an independent Kurdish state and might close the oil “tap”.

Turkey promised on Thursday to deal only with the Iraqi government on crude, “restricting oil export” operations to Baghdad, the office of Iraqi Prime Minister Haider al-Abadi said.

Torbjorn Soltvedt, principal analyst for the Middle East at risk consultancy Verisk Maplecroft, said there was a roughly 20 percent chance that the pipeline linking northern Iraq and Ceyhan in Turkey would be shut.

Gold

Gold touched its lowest in six weeks on Thursday after the dollar and US bond yields rose on proposed US. tax reforms and strong economic data that supported the case for another US. interest rate hike this year.

The dollar was at its strongest since mid-August, US stocks rose and 10year Treasury yields hit a 2-1/2-month high as markets bet President Donald Trump’s tax-cutting plan could accelerate economic growth.

Data meanwhile pointed to underlying strength in the US economy a day after US Federal Reserve Chair Janet Yellen indicated the Fed would push ahead with rate rises.

A stronger dollar makes gold more expensive for holders of other currencies, while higher bond returns reduce the attractiveness of non-yielding bullion. Interest rate increases raise bond yields and tend to boost the dollar.