US Stocks Rise on Tax Reform Optimism

The dollar jumped on Monday versus the currencies of most other developed and emerging nations while Treasury yields rose and Wall Street was primed for a another record-setting day after the U.S. Senate voted to approve a wide-ranging tax overhaul.

U.S. Dollar banknotes are seen in a box at the Money Service Austria company’s headquarters in Vienna, Austria, November 16, 2017. REUTERS/Leonhard Foeger
The British pound was the other currency mover of the day, rising on expectations the United Kingdom would soon reach a deal on some of the terms of its planned exit from the European Union.

But markets reacted broadly to the Senate’s approval on Saturday for the biggest tax law change since the 1980s, taking President Donald Trump closer to his goal of slashing levies on businesses.



European stocks rose more than one percent on average , with German stocks outperforming with a 1.4 percent surge, in anticipation of a strong New York session – futures for the Dow Jones, S&P 500 and Nasdaq indexes rallied as much as 0.9 percent 1YMcv1 EScv1 NQcv1.

“With this tax deal, markets could pick up speed into the end of the year. It looks like the ingredients for a year-end rally are there,” said Angelo Meda, head of equities at asset manager Banor SIM in Milan, predicting equity gains of 3 to 4 percent.

Tax cut hopes have been a significant tailwind this year for U.S. stocks, helping them hit successive record highs. A note from JPMorgan forecast that if the tax rate indeed fell to 20 percent from 35 percent, U.S. firms’ earnings-per-share estimates could rise by about 8 percent in 2018.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza