Dollar Gains With U.S. Stocks on Trump Tax Outlook: Markets Wrap

Updated on
  • U.S. stocks post sixth weekly gain, reach fresh all-time highs
  • Yen drops before Japan vote, Euro slips as investors eye Spain

Northern Trust's McDonald Sees Stocks Moving Higher

The dollar climbed, Treasuries fell and U.S. stocks posted a sixth straight weekly gain on bets Donald Trump was closer to pulling off one of his biggest legislative priorities after the Senate approved a budget vehicle for tax cuts.

All three U.S. equity benchmarks hit records. The dollar reached a three-month high and 10-year Treasury yields approached 2.4 percent amid speculation Trump was moving closer to selecting the next Federal Reserve chief. 

“A lot of the story line we have been talking about this year is now playing out,” said Mike Wilson, Morgan Stanley’s chief U.S. equity strategist. “We’re going to have a good quarter of earnings again, we now are getting closer to the Fed chair certainty. We have the budget resolution, which is a big step in the direction of tax cuts.”

European shares erased some of Thursday’s losses on the back of rising metal prices and positive corporate earnings. The euro slipped as investors eyed political developments in Spain and negotiations over Britain’s departure from the European Union. The Canadian dollar tumbled after inflation and retail sales trailed estimates.

Bloomberg’s Kevin Cirilli reports on the Senate’s attempt to push through a tax overhaul.

Bloomberg

People familiar with the process of selecting the next Fed chief said Trump’s advisers are steering him toward either Jerome Powell, a member of the Fed Board of Governors, or Stanford economist John Taylor. Trump’s goal of rewriting tax laws took a major step forward as the Senate narrowly approved a budget vehicle that could pave the way for a bill.

Meanwhile, sales of previously owned U.S. homes increased unexpectedly in September, showing demand is stabilizing in the aftermath of hurricanes Harvey and Irma.

These are some key upcoming events:

  • Fed Chair Janet Yellen speaks on Saturday.
  • The big highlight of the weekend at China’s Communist Party Congress will be a discussion on reforms for state-owned Chinese companies.
  • Japan goes to the polls on Sunday with a win tipped for Prime Minister Shinzo Abe. Read more here.

Terminal subscribers can read more on our markets blog.

Here are the main moves in markets:

Stocks

  • The S&P 500 Index added 0.5 percent at the close of trading in New York.
  • The Stoxx Europe 600 Index rose 0.3 percent.
  • Japan’s Nikkei 225 Stock Average gained less than 0.05 percent to the highest in about 21 years.
  • The MSCI Emerging Market Index increased 0.2 percent.

Currencies

  • The Bloomberg Dollar Spot Index gained 0.6 percent.
  • The euro fell 0.7 percent to $1.1774.
  • The British pound increased 0.2 percent to $1.3185.
  • The Japanese yen decreased 0.9 percent to 113.52 per dollar, the weakest in 14 weeks.


Bonds

  • The yield on 10-year Treasuries rose six basis points to 2.38 percent, a three-month high.
  • Germany’s 10-year yield climbed five basis points to 0.45 percent.
  • Britain’s 10-year yield added five basis points to 1.33 percent.

Commodities

  • West Texas Intermediate crude rose 0.4 percent to $51.47 a barrel.
  • Gold dipped 0.7 percent to $1,281.52 an ounce.
  • Copper was little changed at $3.168 a pound.

— With assistance by Netty Idayu Ismail, Adam Haigh, Andreea Papuc, Robert Brand, Samuel Potter, and Kristine Aquino

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