The Yen declined, Dollar climbed; Global equities reached records 

The dollar climbed as Treasuries fell after the latest developments in Washington buoyed optimism about the chances for American tax cuts. Stocks in Asia halted a rally after global equities reached records during the week.

The U.S. Senate adopted a fiscal 2018 budget resolution on Thursday that House GOP leaders agreed to accept, indicating impetus to accelerate President Donald Trump’s plan to deliver tax cuts. Japan’s equity benchmarks pared losses as U.S. equity-index futures climbed and the yen declined, unwinding gains from the previous day. New Zealand’s election result pummeled the kiwi dollar as investors said the outlook for economic growth had deteriorated. Gold headed for its fifth weekly drop in six as safe havens lost favor with investors.

“The budget still has to also pass the House, but near term, it should be supportive for the dollar,” said Shinichiro Kadota, a senior foreign-exchange strategist at Barclays Securities Japan Ltd. in Tokyo. “Senate passage of budget was a step required for budget reconciliation to advance tax reform.”

Political developments in Spain, a decision on a Federal Reserve chair that may sway the path of U.S. interest rates, and testing equity valuations are prompting caution among money managers. Politico reported that Trump is leaning toward Jerome Powell as the next Fed chairman, while people familiar with the process said the president’s advisers are steering him toward either Power or Stanford economist John Taylor.

Bouts of volatility in the U.S. equity market continue to dissipate quickly — the CBOE Volatility Index, which surged as much as 17 percent intraday, finished Thursday flat. China’s economy demonstrated its resilience Thursday as gross domestic product expanded 6.8 percent in the third quarter from a year earlier, a reminder of steady global growth.

Madrid is finalizing plans to take control of Catalonia and will hold an extraordinary cabinet meeting on Saturday. Meanwhile, the rebel region is working out how it might stage a unilateral declaration of independence. On the Brexit front, German Chancellor Angela Merkel has urged both sides to strive to reach a deal by year end, saying there’s “zero indication” that the talks on the U.K. exit from the European Union won’t succeed.

These are some key upcoming events:

• The big highlight of the weekend at China’s Communist Party Congress will be a discussion on reforms for state-owned Chinese companies. On Friday, delegates debate changes to the party constitution and culture officials brief the media.
• Bank of Japan Governor Haruhiko Kuroda speaks in Tokyo.
• Japan goes to the polls on Sunday with a win tipped for Prime Minister Shinzo Abe.

Here are the main moves in markets:

Stocks

• Japan’s Topix index was flat as of 2 p.m. in Toyko. Nissan Motor Co. fell as much as 2.4 percent after it said it would suspend production for about two weeks.
• Australia’s S&P/ASX 200 Index rose 0.2 percent and South Korea’s Kospi index gained 0.5 percent.
• New Zealand’s S&P/NZX 50 Index ended little changed after losing as much as 1.2 percent.
• The Hang Seng Index rose 1 percent. That market fell 1.9 percent on Thursday, with moves exacerbated by derivatives contracts. More on that story here.
• Futures on the S&P 500 Index climbed 0.3 percent. The underlying gauge rose less than 0.1 percent on Thursday.

Currencies

• The Bloomberg Dollar Spot Index was up 0.3 percent.
• The yen fell 0.6 percent to 113.19 per dollar.
• The New Zealand dollar fell 0.6 percent to 69.87 U.S. cents, adding to a 1.7 percent slide on Thursday.
• The euro was at $1.1817.
• The pound slid to $1.3104.

Bonds

• The yield on 10-year Treasuries jumped 4 basis points to 2.36 percent.
• Australia’s 10-year yield was at 2.77 percent, reversing a drop earlier.

Commodities

• West Texas Intermediate crude rose 0.4 percent to $51.47 a barrel following a 1.4 percent drop on Thursday.
• Gold declined 0.5 percent to $1,283.36 an ounce, down more than 1 percent this week.

Source: Bloomberg – Dollar Gains, Treasuries Fall on U.S. Tax Hopes: Markets Wrap

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