US tax cut outlook drives global stocks
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 buybacks 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 UK’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. 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 waitand-see attitude to the bill. In fixed income markets, Portuguese bonds were the stand-out 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.
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.