Global stock markets, dollar gain as US tax plan advances
NEW YORK (Reuters) – Global stock markets rose on Monday, along with the dollar and Treasury yields, after a major US tax overhaul cleared an important hurdle.
Markets reacted broadly to the US Senate’s approval on Saturday of the biggest tax-law change since the 1980s, taking President Donald Trump closer to his goal of slashing taxes on businesses.
On Wall Street, the benchmark S&P 500 and Dow industrials rose to record highs, while MSCI’s gauge of stocks across the globe gained 0.45% and hit an all-time peak.
“The big story is indeed the tax-reform passage,” said Brad McMillan, the chief investment officer for Commonwealth Financial Network in Waltham, Massachusetts. “Until fairly recently, markets were pretty skeptical about whether anything was actually going to happen.”
“This can have a meaningful impact on corporate earnings here in the US,” he said. “So you are largely seeing a repricing of the US markets based on that.”
The Republicans’ tax plan is expected to add $1.4 trillion over 10 years to the $20t. national debt to finance changes that they say would further boost an already growing economy.
In early afternoon trading, the Dow Jones Industrial Average rose 238.71 points, or 0.99%, to 24,470.3, the S&P 500 gained 13.61 points, or 0.52%, to 2,655.83, and the Nasdaq Composite dropped 25.64 points, or 0.37%, to 6,821.95.
Some of the biggest gainers were from areas expected to benefit from a lower corporate tax rate. The S&P 500 banks index surged 2.5%, while the Dow Jones Transport Average index jumped 2.7%.
Aetna shares slipped 0.5% after drugstore-chain operator CVS Health agreed to buy the health insurer for $69 billion. CVS shares fell 5.5%.
In Europe, the pan-European FTSEurofirst 300 index rose 0.95%.
The dollar rose against a basket of currencies after the tax package moved forward.
The dollar index rose 0.35%, with the euro down 0.29% to $1.1854. The Japanese yen weakened 0.60% versus the greenback to 112.80 per dollar.
“Dollar bulls are pinning their hopes on the sweeping tax deal leading to a more rapid pace of interest-rate hikes from the Federal Reserve,” said Jake Spark, a US corporate hedging manager at Western Union Business Solutions in Washington.
Benchmark 10-year notes last fell 9/32 in price to yield 2.3937%, from 2.363% late on Friday.
Oil fell as the market saw signs of continuing US production increases, though prices remained in sight of their recent two-year highs thanks to last week’s decision by OPEC and other producers to extend output cuts.
US crude fell 1.03% to $57.76 per barrel, and Brent was last at $62.95, down 1.22% on the day.
Gold prices fell toward the roughly four-week lows hit last week as the dollar strengthened.