Stocks Gain on U.S. Tax Plan; Treasuries Decline: Markets Wrap

Stocks kicked off the penultimate week of the year on a positive note after Republicans reached an agreement on the shape of U.S. tax cuts. The dollar dropped and Treasuries headed lower.

The S&P 500 Index opened higher on Monday as investors continue to focus on the progress of tax legislation. Mid-week votes in the U.S. House of Representatives and Senate are planned on a measure that will reduce corporate and individual tax rates. Lawmakers are aiming for the bill to land on President Donald Trump’s desk for a signature before Christmas.

“The odds of the tax cut legislation getting passed within this year have grown,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Institute Co. This “will benefit not only the U.S., but also economies around the globe including Japan, allowing investors to anticipate an increase in corporate earnings.”

The Stoxx Europe 600 Index climbed the most in seven weeks as real estate, automakers and technology stocks led gains. European bonds were little changed. Sterling advanced before U.K. Prime Minister Theresa May sets out her plan for a proposed Brexit transition period. The euro strengthened after two days of declines. 

Earlier, equity benchmarks in Tokyo, Hong Kong and Sydney advanced after the S&P 500 and other U.S. gauges closed at records on Friday. Indian shares rebounded as Prime Minister Narendra Modi’s party looked set to return to power in his home state, an election that’s considered a bellwether before the national vote in early 2019. South Africa’s rand rose on optimism Cyril Ramaphosa will become the next leader of the ruling African National Congress party.

Elsewhere, oil extended gains toward $58 a barrel as U.S. drillers targeting crude reduced the rig count for the first time in four weeks. Bitcoin traded above $18,000 as futures trading debuted on the CME Group Inc.’s venue, the world’s biggest exchange, giving the cryptocurrency further cachet and access to mainstream investors.

Terminal customers can read more in our Markets Live blog.

Among the key events investors will be watching this week:

• President Donald Trump delivers a national-security speech Monday, when he will call out China for engaging in “economic aggression,” the Financial Times says. 
• Xi Jinping kicks off China’s Central Economic Work Conference. Investor focus will be on whether officials will cut the growth target from this year’s “6.5% or higher.”
• U.K. Prime Minister Theresa May addresses parliament Monday and meets her cabinet Tuesday to begin work on a trade wish list. Europe will unveil its stance Wednesday.
• The disruption to the Forties oil pipeline is key for commodities traders this week. Details about the extent of the damage and a restart date could come at any time.
• The U.S. and U.K. publish updated estimates of third-quarter GDP; U.S. releases PCE data.
• German December Ifo survey Tuesday.
• Catalonia’s secessionists are at risk of becoming a minority in the Spanish region’s parliament as the main pro-unity party is set to add seats in Thursday’s election.
• The Bank of Japan meets to set monetary policy. The Czech Republic, Hungary, Taiwan and Thailand also set interest rates this week.

And these are the main moves in markets:

Stocks

• The S&P 500 Index gained 0.5 percent as of 9:32 a.m. New York time.
• The Stoxx Europe 600 Index climbed 1 percent to the highest in almost six weeks.
• The U.K.’s FTSE 100 Index gained 0.3 percent to the highest in almost six weeks.
• Germany’s DAX Index rose 1.5 percent to the highest in almost six weeks.
• The MSCI Emerging Market Index rose 0.8 percent.

Currencies

• The Bloomberg Dollar Spot Index declined 0.3 percent.
• The euro rose 0.5 percent to $1.1805.
• The British pound climbed 0.7 percent to $1.3416.
• The Japanese yen increased 0.1 percent to 112.47 per dollar.

Bonds

• The yield on 10-year Treasuries climbed one basis point to 2.37 percent.
• Germany’s 10-year yield was unchanged at 0.30 percent.
• Britain’s 10-year yield fell one basis point to 1.144 percent, the lowest in almost 14 weeks.

Commodities

• West Texas Intermediate crude rose 0.5 percent to $57.59 a barrel, the highest in a week.
• Gold increased 0.3 percent to $1,260.48 an ounce, the highest in more than a week.
• Copper gained 0.1 percent to $6,890.50 a metric ton.

— With assistance by Livia Yap, Shingo Kawamoto, Susanne Barton, Chris Anstey, and Cormac Mullen