Asian equities show mixed reaction to Trump tax plan

Thursday 03.10 BST

What you need to know

  • Treasuries continue to sell off
  • Dollar holds at five-week high on Tump tax reform
  • Brent oil falls further from 26-month high
  • Japanese stocks snap two-day decline

Overview

Treasuries continued to sell off, Asia-Pacific equities were mixed and the dollar held at a five-week high after Donald Trump announced plans to slash the US corporate tax rate.

Hot topic

Mr Trump revealed a “framework” for tax reform on Wednesday that would cut the official corporate tax rate to 20 per cent from its present 35 per cent, although his announcement fell short of the 15 per cent rate he promised on the campaign trail.

Mr Trump’s tax agenda, along with Janet Yellen’s comments on Tuesday cautioning against waiting too long to raise interest rates, has seen Treasuries continue to sell off.

The yield on the 10-year US Treasury, which moves inversely to its price, was up 8.2 basis points at an eight-week high of 2.317 per cent. The yield on Japanese government bonds rose 2.6bp to 0.055 per cent while that for Australian government bonds was up 6bp at 2.827 per cent.

The dollar index, a measure of the greenback against a basket of its peers, was 0.2 per cent higher at 93.497, after hitting a five-week high on Mr Trump’s plans.

“Both the USD and US fixed income yields will be pressured higher near-term amid heightened hopes for tax cuts,” said Richard Franulovich, a currency strategist for Westpac. “But as negotiations intensify in coming weeks, significant procedural, fiscal and political constraints are likely to become more apparent. The final version is likely to be delivered later and will in all probability be smaller in scope.”

Equities

In Asia equities, Japanese stocks put in the best performance on Thursday, with the Topix index climbing 0.3 per cent as information technology stocks rose by the same amount and the energy sector climbed 1 per cent.

In Sydney the S&P/ASX 200 was up 0.1 per cent as a 0.4 per cent fall for materials offset a 0.4 per cent rise for financials. Origin Energy rose 1.5 per cent after it said it would sell its conventional upstream oil and gas business Lattice Energy to Beach Energy for $1.2bn.

Hong Kong’s Hang Seng index slipped 0.5 per cent, as financials dipped 0.6 per cent. Chinese insuretech provider ZhongAn Online Property and Casualty Insurance jumped as much as 18.1 per cent in its Hong Kong debut.

Forex

The Japanese yen was flat at ¥112.81 after slipping 0.5 per cent against the greenback as the dollar strengthened on Mr Trump’s reform plans.

The euro was flat at $1.1742 after ending Wednesday 0.4 per cent lower on political uncertainty in the wake of the German election.

The New Zealand dollar snapped a three-day fall to strengthen 0.1 per cent against the dollar to $0.7209 after the country’s central bank kept rates on hold at 1.75 per cent.

Commodities

Brent, the international oil benchmark, was down 0.5 per cent at $57.64 a barrel, after hitting a 26-month high on Tuesday amid speculation over disruption to supplies from Kurdistan. West Texas Intermediate was down 0.3 per cent at $51.98 a barrel.

Data released on Wednesday by the US Energy Information Administration showed crude stockpiles fell unexpectedly last week while gasoline inventories rose. Crude stockpiles fell 1.8m barrels in the week to September 22.

Gold was 0.2 per cent higher at $1,2830, near a four-week low.

For market updates and comment follow us on Twitter @FTMarkets

Leave a Reply

Your email address will not be published. Required fields are marked *

*

six + nineteen =