The progress of the tax reform US boost stocks and dollar


© Reuters. THE EUROPEAN MARKETS END SHARPLY HIGHER

by Marc Angrand

PARIS (Reuters) – The european markets finished sharply rising Monday, and Wall Street has registered new records, the stock markets welcomed the adoption by the u.s. Senate of a proposed tax reform that could boost the profits of listed companies, and therefore justify an increase in valuations.

The prospect of such a reform – one of the main campaign promises of Donald Trump prior to his election to the white House – also benefits the dollar, which recorded a strong rebound after three sessions of decline, and the yields of government bonds with the us.

In Paris, the CAC 40 finished on a progression of 1.36% (72,4 points) 5.389,29 points, recording its best performance in percentage since October 26. In London, the FTSE 100 gained 0.53 per cent and in Frankfurt, the Dax took on 1,53%.

The index EuroStoxx 50 rose by 1.38%, the FTSEurofirst 300 of 0.95% and the Stoxx 600 index of 0.91%.

At the time of closing in Europe, the Dow Jones u.s. posted a gain of 0.94% and the Standard & Poor’s 500 adjugeait of 0.46%, one and the other having registered a little earlier and set new records. The Nasdaq, to him, was dropping to 0.5%, as technology stocks are viewed by many analysts as the least able to take advantage of the tax breaks being considered.

Senators and members of the House of representatives will try in coming days to agree on a common version of the draft tax reform, which could among other things reduce the rate of corporate tax from 35% to 22%, or even 20%.

The prospect of income tax of listed companies to decline sharply in the next year or in 2019 benefits in the first place, telecoms and financial values us, including indices S&P take, respectively, and 1.89% and 2.06%. Conversely, the sector of the “techs” gave up to 1.44%.

THE FINANCIAL FEATURE, THE TECHNOLOGY BEHIND

In Europe, the Stoxx banks has made 1,2%, but the movement of sector rotation is helped by the vote of the u.s. Senate has benefited more other compartments cyclical, such as construction(+1,57%) and automotive (+1,56%).

On the foreign exchange market, the greenback has appreciated 0.36% against a basket of reference currencies and 0.3% against the euro, dropped back under 1,1855 dollar.

The dollar, however, shall give ground against the pound sterling, which takes advantage of the signs of progress in the negotiations on the Brexit, but if it reduced its payout after the declarations of Jean-Claude Juncker, the president of the european Commission, explaining that the discussions with the First minister of the united kingdom, Theresa May, had not allowed for the moment to reach a global agreement.

On the side of the government bonds, the yield on Treasuries to ten years rose to 2.39%, with expectations of rate increases. It was back to 2,3630% on Friday, the announcement of the indictment of Michael Flynn, the former national security adviser, Donald Trump, in the investigation surrounding suspicions of interference in Russian in the presidential campaign of 2016, which triggered a retreat to safe-haven assets.

CURRENT FED TO THE FRONT OF THE M&A

Beyond tax reform in the u.s., the markets are driven by news of mergers and acquisitions, in Europe as in the United States.

Has Wall Street, the specialist in cables General Cable leaps of more than 30% after the announcement of its acquisition for approximately three billion dollars by the Italian Prysmian. The latter has lost of 4.07% in Milan.

The insurer, u.s. healthcare, Aetna abandons 0,79% despite the announcement of an offer for the purchase of the chain of pharmacies and health centers CVS (-6,47%) to 69 billion, the biggest TAKEOVER of the year. The price of the operation had been widely anticipated.

Walt Disney and Twenty-First Century Fox (NASDAQ:FOX), gaining respectively 6,93% and 5.5% after a Financial Times article referring to a resumption of talks on a possible takeover by Disney part of the activities of the group founded by Rupert Murdoch.

Note also the increase of 4,62% of Altice (AS:TCAA), his best performance on a session since November 15. The title displays as two consecutive sessions in the green for the first time since the end of October, although it still lags a fall of 57% over one month.

On the oil market, crude prices are in net decline, below $ 58 a barrel for the light crude to u.s. West Texas Intermediate, WTI) and in the 63 dollar Brent price. The barrel suffers signs of growth in u.s. production, even if it remains close to the highest in two years reached last month.

(Edited by Juliette Rouillon)

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