Senate Tax Bill Boosts Global Shares

By Christopher Whittall and Kenan Machado Features Dow Jones Newswires

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

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The Stoxx Europe 600 rose 0.7% in early trade amid broad-based gains across sectors. U.S. futures pointed to a 0.9% opening gain for the Dow Jones Industrial Average, which ended slightly lower on Friday. Asian stock markets were mixed.

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

That followed a volatile session on Friday when U.S. stocks dipped sharply on reports about former national-security adviser Mike Flynn, who pleaded guilty Friday 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 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 that came on the back of the reports surrounding 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 2.404% 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.

Most sectors across the Stoxx Europe 600 were higher on Monday. Among the biggest gainers were banks, auto makers and miners, which were all up by 1% or more.

Some Asia-Pacific stock markets struggled to gather momentum 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 notched solid gains. 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.

"The weakness in Tencent and Ping An is attracting interest from value buyers," said Castor Pang, head of research for Core Pacific-Yamaichi International.

In commodity markets, Brent crude oil futures prices were down 0.4% at $63.50 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 03:50 ET (08:50 GMT)