Stocks in Japan and Australia were buoyed at the open by optimism over the health of the U.S. economy and President Donald Trump’s tax-cut plan that pushed Treasury yields higher with the dollar and U.S. equities.
Australian bonds joined a global sell-off and Treasury yields reached the highest levels in two months as investors raised their expectations for the Federal Reserve to raise rates one more time this year despite some of Chair Janet Yellen’s colleagues continuing to push back at her contention more hikes are on the way. Bitcoin extended its rally this week to 15 percent as Morgan Stanley CEO James Gorman said it’s “certainly something more than just a fad.”
Focus remains on the outlook for some of the world’s biggest economies, with central bank policy makers from the U.S., U.K. and Australia among speakers at a Bank of England conference starting in London on Thursday. Data is also due on U.S. growth and spending. Market moves may be volatile as we approach the end of the quarter and ahead of week-long market closures in China and South Korea next week.
Trump’s tax-reform plan announcement is just the start of what’s expected to be a brutal fight in Congress, but equity investors were encouraged by several proposals, such as allowing companies to write off capital expenditures for five years. The dollar received a push from the prospect of capital inflows as companies take advantage of a proposed one-time repatriation tax.
Terminal subscribers can read more in our Markets Live blog.
What to watch out for the rest of this week:
- Japan August industrial production and retail sales are due Friday as is South Korea’s current account balance for August.
- U.S. data on GDP and personal spending Thursday will provide further clues as to the potential Fed policy path.
- The euro-area inflation rate may have accelerated a touch to 1.6 percent in September from 1.5 percent but the core will probably remain at 1.2 percent. The data is out on Friday.
And here are the main moves in markets:
- Japan’s Topix index advanced 0.4 percent as of 9:15 a.m. Tokyo time. Australia’s S&P/ASX 200 Index gained 0.3 percent, while South Korea’s Kospi index was 0.2 percent lower.
- Hang Seng Index futures slid 0.5 percent.
- Futures on the S&P 500 were slightly lower. The underlying gauge rose 0.4 percent to 2,507.04.
- The Russell 2000 soared 1.9 percent, the most in six months, to reach another record on Wednesday.
- The Bloomberg Dollar Spot Index was little changed after rising 0.6 percent to a six-week high in the previous session.
- The yen was at 112.78 per dollar after it dropped 0.5 percent in the previous session.
- The euro was at $1.1748, after declining for three straight days.
- The New Zealand dollar rose 0.2 percent to 72.15 U.S. cents, shrugging off initial weakness after the Reserve Bank of New Zealand signaled it will keep rates on hold for some time on a weaker economic growth outlook and slowing inflation.
- The yield on 10-year Treasuries was at 2.30 percent. It jumped seven basis points on Wednesday to 2.31 percent, the highest in two months.
- Australia’s 10-year bond yield climbed three basis points to 2.82 percent.
- West Texas Intermediate crude was steady at $52.11 after climbing 0.5 percent on Wednesday.
- Gold was at $1,284.41 an ounce, near the weakest level since mid-August, after declining 0.9 percent.