Asian shares up on US tax, earnings hope; Mueller report hits USD
Tokyo: Asian shares rose firmly on Friday as strong U.S. earnings and a step forward in Congress on U.S. tax reform brightened the mood, even though investors noted that many hurdles remain to passage of a deal on tax cuts.
But the dollar fell after the Wall Street Journal reported Special Counsel Robert Mueller’s team last month subpoenaed President Donald Trump’s campaign for documents containing specified Russian keywords from more than a dozen officials.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.8 percent while Japan's Nikkei .N225 gained 0.4 percent, extending its recovery from a near three-week intraday low hit on Thursday.
Wall Street’s main indexes rose sharply on Thursday, boosted by strong gains in Wal-Mart (WMT.N) and Cisco (CSCO.O) following their earnings.
The S&P 500 .SPX advanced 0.82 percent to turn positive for the week, a day after hitting a three-week low, while the Nasdaq Composite .IXIC added 1.3 percent to a closing record high of 6,793.29.
MSCI’s broadest gauge of the world’s stock markets .MIWD00000PUS stemmed its five-day losing streak and posted its biggest daily gain in two months, of 0.80 percent, on Thursday.
Junk bond prices rebounded sharply, with iShares High Yield Bond ETF (HYG) gaining almost one percent to recoup more than half of its losses since the start of the month.
“The markets had been wary of fall in credit products during the last few days but it seems we just had a healthy correction. As the European Central Bank and the Bank of Japan are still pumping liquidity, the world’s asset markets will be supported,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.
The U.S. House of Representatives approved a broad package of tax cuts sought by Trump, passing its first, if smallest, hurdle and providing a catalyst for fresh buying in risk assets.
The tax debate now moves to the U.S. Senate, where that chamber’s separate plan has already encountered resistance from some Republicans. No decisive Senate action is expected until after next week’s Thanksgiving holiday on Nov. 23.
The positive mood on Wall Street helped to lift the yield on two-year U.S. notes US2YT=RR to a nine-year high, with a Fed rate hike in December seen almost as a done deal.
Fed funds rates futures are now pricing in about a 90 percent chance of another rate hike by June next year, the highest level in recent months and up from about 50 percent just over a month ago.
The U.S. dollar, however, lost momentum and fell broadly following the media report Mueller issued a subpoena to more than a dozen officials in the Trump administration.
The dollar fell 0.5 percent to 112.46 yen JPY=, hitting its lowest level in almost a month.
The euro EUR= gained 0.4 percent to $1.1815, edging back towards its one-month peak of $1.1862 touched on Wednesday.
Among Asian currencies, countries with current account surpluses saw their currencies gains.
The Korean won KRW= rose to its highest level in over a year, gaining 2.4 percent this week while the Thai baht THB= hit a two-year high and the Malaysia ringgit MYR= a one-year high, rising 0.8 percent and 0.7 percent respectively for the week.
Bitcoin BTC=BTSP hit a record high of $7,997, quickly recovering from its 30-percent plunge last week.
Oil prices have slipped from two-year highs hit last week on signs that U.S. supply is rising and could potentially undermine OPEC’s efforts to tighten the market.
U.S. light crude CLc1 stood at $55.34 a barrel, up 0.4 percent on the day but still within its trading range in the past couple of days and down 2.5 percent on the week.
Brent futures LCOc1 hit a two-week low of $61.08 a barrel and last stood at $61.24, down 0.2 percent on the day.