China data, dollar, US tax reform in focus

Tax reform was back in the spotlight in the U.S. after House Speaker Paul Ryan said Wednesday that a plan from Republicans would be released the week of Sept. 25.

While “nothing concrete” was announced, “there is a growing feeling that something will be done amid [President Donald] Trump’s bipartisan approach along with the need for Republicans to score some runs ahead of next year’s election,” said National Australia Bank Currency Strategist Rodrigo Catril in a morning note.

Optimism over tax reform led to yields of the 10-year U.S. Treasury note rising to 2.19 percent on Wednesday, above the 2.17 percent seen in the prior session.

The dollar pared some gains after getting a lift from developments out of Washington overnight. The dollar index, which tracks the greenback against a basket of rival currencies stood at 92.379 at 8:12 a.m. HK/SIN, after trading as high as 92.530 overnight. The dollar index had traded around the 91 handle seen earlier this week.

The dollar extended gains against the yen, with the currency last fetching 110.53 yen compared to levels around 110.4 seen in the previous session.

Investors also noted the bounce in U.S. producer prices in August, although the 0.2 percent increase on month was weaker than expected.

On Wall Street, stocks closed at record levels despite mostly flat trade during the session, with the Dow Jones industrial average rising 0.18 percent, or 39.32, to close at 22,158.18.

Despite a fall in Apple stock on Wednesday, the company’s South Korean suppliers continued their climb following the unveiling of the newest iPhone on Tuesday. Samsung Electronics was up 0.81 percent in early trade, SK Hynix advanced 0.92 percent and LG Display jumped 2.13 percent. Taiwan-listed Apple suppliers had closed down on Wednesday.

In corporate news, Toshiba said Wednesday it had entered into a memorandum of understanding with a consortium including Bain Capital to expedite negotiations to sell Toshiba Memory Corporation, its flash memory unit. Toshiba shares fell 2.11 percent in early trade.

The economic calendar for Thursday is fairly packed, with a barrage of China data expected to be closely watched by investors (all times HK/SIN):

  • 9:30 a.m.: Australia August labor force
  • 10:00 a.m.: China fixed asset investment, industrial production and retail sales
  • 2:30 p.m.: India wholesale price index
  • 4:00 p.m.: China new yuan loans
  • 4:40 p.m.: Hong Kong industrial production

Outside of Asia, the Bank of England will announce its interest rate decision at 7:00 p.m. HK/SIN. The central bank is widely expected to leave interest rates unchanged. The unemployment rate in the country dropped to 4.3 percent in the three months ending in July, but wage growth failed to impress, Reuters reported.

On the energy front, U.S. crude edged down 0.16 percent to trade at $49.22 a barrel after settling more than $1 higher overnight. Brent crude slid 0.31 percent to trade at $54.99. Gains in oil prices on Wednesday came after the International Energy Agency said the oversupply of crude was beginning to shrink, according to Reuters.

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