Senate Tax Bill Boosts Global Shares -- 2nd Update

By Christopher Whittall and Kenan Machado Features Dow Jones Newswires

U.S. futures and European stocks rose Monday as investors digested the implications of the Senate passing its version of tax reform over the weekend.

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The Stoxx Europe 600 climbed 0.9% with gains across sectors, while futures pointed to a 0.9% opening gain for the Dow Jones Industrial Average. Stock markets in the Asia-Pacific region were mixed.

Investors moved out of havens such as Treasurys and gold, and pushed the dollar higher.

The moves follow a volatile session Friday when U.S. stocks fell sharply on reports about former national-security adviser Mike Flynn, who pleaded guilty to lying to federal investigators about his communications with Russia. But stocks rallied into Friday's close on signs lawmakers had the votes to pass their tax measure and markets looked set to continue that positive tone on Monday.

The Senate passed sweeping revisions to the U.S. tax code past midnight Saturday after Republicans overcame internal divisions to pave the way for $1.4 trillion in tax cuts that would lower the corporate rate from 35% to 20%. The House and Senate still need to reconcile competing versions of the tax plan, something GOP leaders hope to do by Christmas.

Ronald Temple, head of U.S. equity at Lazard Asset Management, estimated that around 50% to 70% of the impact of the tax plan had been baked into markets before the passage of the Senate's bill.

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"Obviously, for corporates it's a windfall," Mr. Temple said. "It's unlikely to materially change the growth trajectory, but it is likely to materially change earnings growth," he said.

Other markets showed signs of reversing Friday's moves as investors grappled with the news about Mr. Flynn. Investors had piled into havens like gold and U.S. Treasurys and sold the dollar.

The WSJ Dollar Index was up 0.4% on Monday, while the yield on the 10-year Treasury note rose to 2.395% from 2.363% on Friday. Yields move inversely to prices. Gold declined 0.5% to $1,276 an ounce on Monday after rising on Friday.

News that CVS Health Corp. has agreed to buy Aetna Inc., prompted CVS shares to fall 4% in premarket trading, while Aetna rose 2.5%, according to FactSet.

The Stoxx Europe 600's gains were broad-based on Monday, with the banking, auto and construction sectors all up by 1% or more.

With U.S. stock markets near record highs, some investors say they see greater value in other regions. Jeroen Blokland, a portfolio manager at Dutch asset manager Robeco, said that given economic momentum is already building, the Senate tax bill "is another sign for investors that this rally can continue for quite some time even though valuations are stretched."

Still, those high valuations in the U.S. have led him to favor European and Japanese stocks. "Japan is doing great and Europe has some catching up to do," he said.

Some Asia-Pacific stock markets struggled Monday after pockets of selling last week, notably in technology. Japan's Nikkei Stock Average closed down 0.5% as some tech stocks again came under pressure.

But other markets ended higher. After declines last week, benchmarks in Korea and Taiwan rose 1.1% and 0.5% respectively. Hong Kong's Hang Seng Index rose 0.4% thanks to gains from index heavyweight Tencent and insurer Ping An.

In commodity markets, Brent crude oil futures prices were down 0.6% at $63.36 a barrel.

Write to Christopher Whittall at christopher.whittall@wsj.com and Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

December 04, 2017 06:55 ET (11:55 GMT)