Signs of progress with US tax cuts and Europe’s Brexit negotiations brought fresh highs for world stocks yesterday. Britain’s pound was also in focus, rising to $1.34 for the first time since October on reports that Britain has offered as much as €50 billion ($59.2 billion) – most of what the European Union wants – to settle a Brexit “divorce bill”.
Sterling’s strength did push London’s FTSE into the red, but elsewhere the mood was almost exclusively upbeat, particularly in bank stocks after the soon-to-be head of the Federal Reserve said some regulations could be scaled back.
Germany’s DAX, France’s CAC, Milan and Madrid were all up between 0.6 and 1.3 per cent and MSCI’s all-country world index was at yet another record peak after all four major Wall Street indexes notched up new highs on Tuesday.
Asian share markets had not quite as jubilant, checked by caution over the latest missile test by North Korea and concerns at recent softness in Chinese shares.
MSCI’s broadest index of Asia-Pacific shares outside Japan barely budged from where it started the day, while China’s blue chip index ended flat having slipped as much as 1 percent at one point.
Among the better performers, Japan’s Nikkei added 0.5 per cent, while Australia’s main index rose 0.45 per cent.
The prospects for a US tax cut seemed to improve after Senate Republicans rammed forward their Bill in a committee vote that set up a full vote by the Senate as soon today, although details of the measure remained unsettled.
But Republican leaders conceded that they have yet to round up the votes needed for passage in the Senate, where they hold a narrow 52-48 majority.
The S&P financial sector soared 2.6 per cent in reaction, its biggest daily gain since March 1.
That helped the Dow climb 1.09 per cent, while the S&P 500 rose 0.99 per cent and the Nasdaq added 0.49 per cent. Adding to the bullish mood was data showing US consumer confidence surged to a near 17-year high in November, while home prices rose sharply in September, which should underpin consumer spending.
Euro zone government bond yields edged higher meanwhile as the first instalments of German state inflation data pointed to another uptick for Europe’s largest economy, which should bolster the ECB’s move to wind down its stimulus.
It all helped the euro reassert its recent dominance over the dollar.
The euro climbed as far as $1.1882 and against a basket of currencies the dollar at 93.241 and not far off a two-month trough touched on Monday.