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Asia: Stocks mixed as tax vote awaits; yields climb

[TOKYO] Asian stocks were mixed on Wednesday after US benchmarks dipped, with investors awaiting the final votes on US tax-cut legislation. Bond yields climbed amid focus on the outlook for increased supply in 2018, with less central bank buying.

Japanese equity benchmarks saw small gains, while those in Seoul and Sydney were flat. The S&P 500 Index slipped from a record Tuesday. Longer-dated US Treasury yields jumped to the highest since October overnight, with traders attributing the move to an unwinding of bets on a shrinking gap with shorter-dated notes. European yields also climbed overnight.

Most fund managers see US tax cuts boosting bond yields, along with stocks, next year, a Bank of America Merrill Lynch monthly survey showed. A net 83 per cent of respondents viewed bond markets as overvalued.

The bump in American yields did little to help the dollar, which traded within recent ranges against the euro and yen. Oil climbed after news of a surprise drop in US crude stockpiles. South Korean tourism-related stocks, such as cosmetics makers, will be in focus after a report that China is again banning package tours to its neighbour.

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With the Republicans closing in on a legislative victory that would give corporations lasting tax cuts, investors are assessing how the bill will impact the world's largest economy. It's largely anticipated to add to growth in the next year, but the longer-term impact is less certain. 

The US House of Representatives voted to approve the tax bill Tuesday, but will have to vote again today because the current draft doesn't comply with Senate rules.

Once the tax bill is behind, equities in Asia could refocus on the region's own prospects in 2018, with forecasts for world-leading growth offering a tailwind for corporate earnings, at least in the minds of some."If anybody's looking for cheap markets in the world, you find them in Asia - I mean, 13 times is very low compared to the rest of the world," Hartmut Issel, head of Asia Pacific equity and credit at UBS AG Wealth Management in Singapore, said on Bloomberg Television, referring to valuations relative to earnings. "We have upgraded" Asian equities excluding Japan, he said.

Among the key events investors will be watching this week: The US and UK publish updated estimates of third-quarter GDP.

The Bank of Japan meets on Thursday to set monetary policy.

Catalonia votes in an election Thursday that will pose a test for the Spanish region's secession movement.

And these are the main moves in markets: Stocks Japan's Topix index was up 0.2 per cent as of 10.15am in Tokyo, while the Nikkei 225 Stock Average advanced 0.1 per cent.

Futures on the S&P 500 Index rose 0.2 per cent after the underlying gauge declined 0.3 per cent Tuesday.

Futures on Hong Kong's Hang Seng were down 0.4 per cent.

Australia's S&P/ASX 200 was little changed.

CURRENCIES

The Bloomberg Dollar Spot Index closed little changed Tuesday.

The euro traded at US$1.1845 after climbing 0.5 per cent Tuesday.

The Japanese yen was at 112.92 per dollar after slipping 0.3 per cent.

BONDS

The yield on 10-year Treasuries jumped 7 basis points Tuesday, to 2.46 per cent. It slipped to 2.45 per cent in early Wednesday trading.

Australian 10-year yields increased about 6 basis points, to 2.63 per cent.

Germany's 10-year yield climbed seven basis points to 0.38 per cent Tuesday.

Commodities West Texas Intermediate crude was little changed at US$57.76 a barrel after advancing 0.7 per cent Tuesday.

Gold was at US$1,262.65 an ounce.

BLOOMBERG