Stocks Make Little Headway After Tax Bill

Catalonia heads to the polls

-- Bank of Japan sticks to easing program

-- Pound steadies after May loses top ally

Stocks in Europe and Asia mostly followed Wall Street lower Thursday after Congress gave final approval to a $1.5 trillion tax cut.

The Stoxx Europe 600 edged down 0.4% in the early minutes of trading, echoing muted sessions in the U.S. and Asia. Futures pointed to small opening declines for the Dow Jones Industrial Average.

While the tax bill is widely expected to boost corporate profits, investors have been questioning how much of the tax shake-up has already been priced into markets this year and what impact the changes will have on the economy.

"It could give corporates more clarity and a one-year jump in earnings growth, but any pickup may be offset by tighter [monetary] policy," said Zahra Ward-Murphy, equity strategist at Absolute Strategy Research.

If the tax change boosts growth and inflation, some investors believe it could also prompt the Federal Reserve to quicken the pace of interest rate increases. Yields on 10-year U.S. Treasurys were last steady at 2.498% around their highest since July, while two-year yields held still at 1.859%, around their highest since September 2008. Yields move inversely to prices.

Investor focus also began to shift to from the tax news to a short-term spending bill to avoid a government shutdown, analysts said, contributing to the more muted tone.

In Europe, Catalans vote for a new regional assembly on Thursday in a ballot that could determine whether separatists in the Spanish region double down on their secessionist drive. Recent polls suggest the vote is too close to call.

Spain's IBEX 35 index edged down 0.5% in morning trading, roughly in line with the rest of Europe, while yields on 10-year Spanish debt were unchanged from Wednesday.

The pound was last down 0.1% at $1.3357. The British currency weakened slightly earlier following the resignation of a senior minister in Theresa May's cabinet. The departure of Damian Green shifts the balance of power in the cabinet at a critical time in Brexit negotiations.

Earlier, Asia-Pacific stock markets were mixed in thin volumes ahead of the holidays.

Stock benchmarks in Japan, Australia and Taiwan ended slightly lower after the muted session in the U.S. The Bank of Japan's latest policy statement, which maintained its main policy stances, had little market impact.

South Korea's stock benchmark closed down 1.7% on fresh weakness in Samsung Electronics, which ended 3.4% down. It was downgraded by Morgan Stanley last month after hefty gains this year, and its shares have moved at least 1% in 11 of the past 19 sessions.

Among the gainers, Hong Kong's Hang Seng Index was up 0.5%, led by a rise in materials and energy stocks. The Shanghai Composite Index rose 0.4%.

U.S. tax changes should boost growth and indirectly contribute to greater demand for goods and services produced in Asia, said Jonathan Garrick, who manages the $63 million Neutron Asia Absolute Return Fund.

"It's a huge positive for American business and the American economy--whether it puts them in trouble with the deficit is another question--but a strongly growing U.S. economy is for the benefit of the world," he added.

Write to Riva Gold at riva.gold@wsj.com and Gregor Stuart Hunter at gregor.hunter@wsj.com

(END) Dow Jones Newswires

December 21, 2017 03:59 ET (08:59 GMT)