US step towards tax reform helps equities

[LONDON] Equities across the globe got a boost on Friday from US lawmakers taking a step toward enacting the tax reform plan sought by President Donald Trump.

The adoption late Thursday by US senators of a budget resolution will ease the path of tax reform measures, helping Tokyo extend its record-winning streak.

That provided a positive start to Europe, where EU leaders throwing British Prime Minister Theresa May a lifeline in Brexit talks also helped improve sentiment.

The gains largely evaporated at the close.

Frankfurt ended flat after car shares skidded on a raid by EU anti-trust investigators at BMW.

Wall Street pushed higher as investors welcomed the movement forward on tax reform, with the Dow up 0.4 per cent approaching midday.

"Optimism over some form of tax reform in the US has waxed and waned constantly since the beginning of the year, and while there still remains some way to go before a plan passes the house, the fact that some progress on a blueprint has taken place, can be seen as progress," said Michael Hewson, chief market analyst at CMC Markets UK.

Senators agreed a budget resolution that unlocks a procedure allowing Republicans to push through such measures with a simple majority vote, which means they won't need votes from Democrats.

Mr Trump hailed the vote as "an important step in advancing the administration's pro-growth and pro-jobs legislative agenda".

Expectations of the tycoon's tax cuts and big spending plans would boost the economy were one of the drivers of a months-long global markets rally that kicked off after his November election, though a series of White House crises and legislative setbacks pared those gains.

While the controversial proposals still have a long way to go before being passed, the news spurred Asian markets to life Friday after a plodding start to the day, while the dollar strengthened against the yen as well as the euro.

The Nikkei 225 inched up 0.04 per cent to end at 21,457.64 points, rising for the 14th day straight to match a record set in 1961.

In Europe, EU leaders agreed to start preparations for the next stage of negotiations with Britain over Brexit.

As expected, the other 27 leaders agreed there had been insufficient progress on the divorce talks to officially move on to the future relationship with Britain, but still approved the start of internal preparations for post-Brexit trade and a transition deal.

"We also saw a slightly more positive tone out of Brussels with respect to the Brexit talks after German Chancellor Angela Merkel acknowledged that the EU side also needed to move on its negotiating position in the Brexit talks," said Hewson.

"What also appeared to be significant was an admission by Donald Tusk that the separate internal EU27 talks on trade would take UK proposals into account," he added.

The apparent softening of the EU's position helped boost the pound.

Meanwhile, Spain's IBEX 35 index added 0.3 per cent although tensions over Catalonia still ran high as Madrid prepared to seize powers from the regional government.

REUTERS