ASIA MARKETS: Financials Drive Gains In Japan, Australia On Investor Optimism Over U.S. Tax Plan

By Kenan Machado Features Dow Jones Newswires

Financial stocks drove gains in Japan and Australia on Monday as investors reacted to prospects of a completed tax bill getting through Congress this week.

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Bitcoin was again in focus, as trading began for the cryptocurrency on the world's largest futures exchange.

Futures prices were initially above $20,000 on the CME before pulling back, and bitcoin itself slumped in Asian trading, according to CoinDesk. It was recently around $18,952, versus $19,500 just before futures trading started.

Read:Bitcoin futures debut on world's biggest exchange at $20,000, then pull back (http://www.marketwatch.com/story/bitcoin-futures-debut-on-worlds-biggest-exchange-at-20000-then-pull-back-2017-12-18)

Financial stocks got a boost after Republicans released the tax-reform proposal (http://www.marketwatch.com/story/heres-whats-in-the-republican-tax-deal-2017-12-13) they plan to put up for a final vote this week, which helped U.S. stocks hit fresh record highs on Friday.

The Nikkei closed up 1.6%, aided by 2% gains for some major financial stocks. Meanwhile, the yen gave back some of last week's strength, with the U.S. dollar around Yen112.64 versus Yen112.25 at the end of local stock trading Friday.

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"Investors are focusing on the tax reforms in the U.S. as that will help its GDP grow," said Hisao Matsuura, chief strategist at Nomura in Japan. In turn, that should help firms exporting to the U.S., he added.

Construction-equipment maker stocks were strong morning, with Komatsu (6301.TO) rising 1.9%.

Meanwhile, Australia's S&P/ASX 200 rose 0.7%. Australia & New Zealand Banking (ANZ.AU) gained 2.1% and Macquarie (MQG.AU) gained nearly 2%, while mining stocks also rose more than 1%.

The Republican tax proposal would eliminate the tax on profits made outside the U.S. and have companies pay a levy on earnings currently offshore at a much-reduced rate. The current policy has resulted in American companies leaving nearly $1.9 trillion abroad, according to Moody's Investors Service.

Tax experts say companies would bring to the U.S. much of their overseas cash if the rate is cut.

"Christmas will come early if the tax reforms translate to legislation," said Shane Chanel, an equities and derivatives adviser at ASR Wealth Advisers.

Stocks in much of the rest of Asia Pacific were little changed, though Hong Kong's Hang Seng as up 0.4% amid support from financial stocks there as well.

Oil futures were slightly higher in Asian trading.

S&P 500 futures were recently up 0.3%.

Some said profit-taking to end 2017 may not be as consequential as it has been in years past.

"These 'Santa rallies' could be shallow given details of the 'compromise' tax bill have been suggested (and arguably digested) by the markets for some time now," said Vishnu Varathan, head of economics and strategy at Mizuho Bank.

Matsuura from Nomura said end-of-the-week profit-taking by investors ahead of the holidays wouldn't come as a surprise.

Meanwhile, investors are awaiting election results from two states in India. Exit-poll data on Friday indicated Prime Minister Narendra Modi would solidify his position there, which led to rallies in stocks and the rupee.

(END) Dow Jones Newswires

December 18, 2017 06:13 ET (11:13 GMT)