Stocks gain on US tax plan, treasuries decline

Dublin - Stocks kicked off the penultimate week of the year on a positive note after a Republican agreement on the shape of US tax cuts aimed at boosting growth in the world’s largest economy. 

The dollar dropped and Treasuries headed lower.

The Stoxx Europe 600 Index rose for the first time in three sessions as automakers and technology stocks led gains. Earlier, equity benchmarks in Tokyo, Hong Kong and Sydney climbed after the S&P 500 Index and other American gauges closed at records on Friday. 

Core European bonds declined, while those in the periphery edged higher. Sterling strengthened before UK Prime Minister Theresa May sets out her plan for a proposed Brexit transition period. 

The euro strengthened after two days of declines.

Investors continue to focus on the progress of US tax reform as the year winds to a close. Mid-week votes in the House and Senate are planned on the legislation 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. This "will benefit not only the US, but also economies around the globe including Japan, allowing investors to anticipate an increase in corporate earnings." 

Meanwhile, Indian shares rebounded as Prime Minister Narendra Modi’s party is 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 US drillers targeting crude reduced the rig count for the first time in four weeks. Bitcoin traded at around $19.000 as futures trading debuted on the CME Group’s venue, the world’s biggest exchange, giving the cryptocurrency further cachet and access to mainstream investors.

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." UK Prime Minister Theresa May addresses parliament Monday and meets her cabinet on Tuesday to begin work on a trade wish list. Europe will unveil its stance on 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 US and UK publish updated estimates of third-quarter GDP; US releases PCE data. German December Ifo survey on 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 Stoxx Europe 600 Index climbed 0.8% as of 9:29am London time. The UK’s FTSE 100 Index gained 0.4% to the highest in almost six weeks. Germany’s DAX Index rose 1.2% to the highest in almost six weeks. 

Japan’s Nikkei 225 Stock Average climbed 1.5% to the highest in a week. The MSCI Asia Pacific Index jumped 0.8% to the highest in almost three weeks. 

The MSCI Emerging Market Index rose 0.4% to the highest in almost three weeks. Futures on the S&P 500 Index increased 0.3% to 2.690.00, the highest on record. 

Currencies

The Bloomberg Dollar Spot Index declined 0.2% The euro climbed 0.4% to $1.1792. The British pound rose 0.2% to $1.3351. The Japanese yen dipped less than 0.05% to 112.65 per dollar.

Bonds

The yield on 10-year Treasuries climbed two basis points to 2.37%. Germany’s 10-year yield gained less than one basis point to 0.31%. Britain’s 10-year yield fell less than one basis point to 1.146%, the lowest in almost 14 weeks. 

Japan’s 10-year yield dipped less than one basis point to 0.042%, the lowest in two weeks.

Commodities

West Texas Intermediate crude rose 0.8% to $57.75 a barrel, the highest in a week. Gold increased 0.1% to $1.257.21 an ounce, the highest in more than a week. Copper declined 0.5% to $3.12 a pound.