Wall St cheers tax bill approval, Gulf surges

NEW YORK: Wall Street indexes surged yesterday after the US Senate passed its version of a tax code overhaul, bringing the Republicans closer to implementing corporate tax cuts. Some of the biggest gainers included bank and industrial stocks. Bank of America and JPMorgan rose more than 3 percent, while Caterpillar and Boeing gained about 2 percent.

“This is a positive reaction to the Senate’s passage,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas. The Senate on Saturday approved their version of tax bill in a narrow 51-49 vote. The Senate and the House of Representatives will have to settle differences in their respective versions before it becomes a law.

“That (reconciliation) can be a bit of a challenge because there are differences and the number of approvals to pass it is a little bit higher than it was for the individual two sides of the Congress,” said Frederick. The S&P 500 has risen about 18 percent this year on strong corporate earnings and solid economic growth and also on hopes that Trump’s agenda of corporate tax cuts and looser regulations could come through.

At 9:35 am ET (1435 GMT), the Dow Jones Industrial Average was up 203.98 points, or 0.84 percent, at 24,435.57, the S&P 500 was up 18.35 points, or 0.70 percent, at 2,660.57 and the Nasdaq Composite was up 41.45 points, or 0.61 percent, at 6,889.04.

Aetna shares rose 1.7 percent after drugstore chain operator CVS Health agreed to buy the health insurer for $69 billion in the year’s largest corporate acquisition. CVS shares were down about 4 percent. General Cable jumped about 34 percent after Italian rival Prysmian agreed to buy the cable maker in a deal that could value it at about $3 billion, including debt.

Blue Apron rose 6.2 percent after Barclays upgraded the meal-kit delivery company’s stock to “equalweight”, supporting its move to promote its chief financial officer as the chief executive.

Advancing issues outnumbered decliners on the NYSE by 2,099 to 544. On the Nasdaq, 1,994 issues rose and 518 fell.

Emerging equities rose from two-week lows yesterday helped by a key growth-boosting US tax overhaul, but currencies fell against the stronger dollar, led by the Turkish lira under pressure from rising inflation.

MSCI’s benchmark emerging stocks index rose 0.5 percent, ending three straight days of losses. Both South Korean and Indonesian stocks rose over 1 percent, whilst Chinese blue chips gained 0.5 percent.

The moves reflected a broad-based rally in global equity markets following the US Senate’s approval of a tax overhaul on Saturday, which investors hope will ultimately boost corporate earnings and growth.

Even Turkish banks, which have been under pressure due to worries about potential US fines, bounced 1 percent, with the broader Turkish stock market up 0.5 percent.

“People are pleasantly surprised by the Senate passage of the US tax bill, which is pushing up short-term interest rates and US growth expectations,” said Koon Chow, an emerging markets strategist at UBP. “This is good for equities globally, but not so good for currencies relative to the dollar.”

The dollar firmed 0.3 percent, adding to headwinds for emerging currencies such as the lira, which plumbed record lows in November. The lira weakened 0.25 percent after data showing inflation spiked to 12.98 percent in November, the highest in 14 years.. Turkish assets have also been in the firing line due to an ongoing US court case which has raised tensions between Ankara and Washington.

JPMorgan said its monthly survey showed investors had sharply cut lira overweight positions in November, while the fall in Turkish local debt positioning was larger than in any other surveyed market. Expectations are mounting that the central bank will act at its Dec. 14 meeting to put a floor under the tumbling lira and tame inflation. Chow predicted a rate rise of around 100 basis points.

The South African rand was one of the few currencies to firm, up 0.4 percent on indications that Deputy President Cyril Ramaphosa was doing well in nominations to become the next leader of the ruling ANC party. Ramaphosa is seen as more business-friendly than rival candidate Nkosazana Dlamini-Zuma.

Gulf stocks

In the Gulf, Qatar stocks bounced over 2 percent to near one-month highs on hopes that Doha can resolve its diplomatic dispute with four other Arab countries at a summit this week. Saudi stocks were trading at almost two-month highs after jumping 1.2 percent on Sunday, and Abu Dhabi shares gained 1 percent. In emerging Europe, the Polish zloty firmed 0.2 percent against the euro. The Polish central bank is expected to keep interest rates on hold at a record low of 1.5 percent at its meeting today despite a rise in inflation coupled with robust economic growth. —Reuters