Pound up as Britain coughs up, Bitcoin rockets
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[November 29, 2017]
By Marc Jones
LONDON (Reuters) - Signs of progress with
U.S. tax cuts and Europe's Brexit negotiations brought fresh highs for
world stocks on Wednesday, while bitcoin topped $10,000 in a frenzy for
Britain's pound was also in focus, rising to $1.34 <GBP=> for the first
time since October on reports that Britain has offered as much as 50
billion euros ($59.2 billion) -- most of what the European Union wants
-- to settle a Brexit "divorce bill".
Sterling's strength did push London's FTSE <.FTSE> into the red, but
elsewhere the mood was almost exclusively upbeat, particularly in bank
stocks after the soon-to-be head of the Federal Reserve said some
regulations could be scaled back.
Germany's DAX, France's CAC, Milan and Madrid were all up between 0.6
and 1.3 percent and MSCIís all-country world index <.MIWD00000PUS> was
at yet another record peak after all four major Wall Street indexes
notched up new highs on Tuesday.
They were expected to be in consolidation mode when U.S. trading
resumes. Revised Q3 GDP figures and inflation data will be vying for
attention with the ongoing tug-of-war over Donald Trump's tax cut plans.
"It seems to me markets are still trading on the theory that the glass
is half full," said fund manager Hermes' chief economist Neil Williams.
Asian share markets had not quite as jubilant, checked by caution over
the latest missile test by North Korea and concerns at recent softness
in Chinese shares.
MSCI's broadest index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> barely budged from where it started the day, while
China's blue chip index <.CSI300> ended flat having slipped as much as 1
percent at one point. [.SS]
Among the better performers, Japan's Nikkei <.N225> added 0.5 percent,
while Australia's main index <.AXJO> rose 0.45 percent.
The prospects for a U.S. tax cut seemed to improve after Senate
Republicans rammed forward their bill in a partisan committee vote that
set up a full vote by the Senate as soon as Thursday, although details
of the measure remained unsettled.
But Republican leaders conceded that they have yet to round up the votes
needed for passage in the Senate, where they hold a narrow 52-48
Some analysts, however, did warn of the risks of unintended consequences
if the package was passed.
"Tax cuts will mainly boost the demand side of the economy at a time
when the economy has little spare capacity," said Jeremy Lawson, chief
economist at Standard Life Investments.
"For that reason, the package will primarily bring forward activity with
most of the stimulus eventually offset by the Federal Reserve lifting
interest rates more quickly."
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A Bitcoin and Dollar notes are seen in this illustration picture
taken September 27, 2017. REUTERS/Dado Ruvic/Illustration
Fed chair nominee Jerome Powell, in his Senate confirmation hearing on
Tuesday, said the case for a December rate hike was coming together.
Powell also hinted at a lighter touch for bank regulation, saying
current rules were already tough enough.
The S&P financial sector <.SPSY> soared 2.6 percent in reaction, its
biggest daily gain since March 1. That helped the Dow <.DJI> climb 1.09
percent, while the S&P 500 <.SPX> rose 0.99 percent and the Nasdaq <.IXIC>
added 0.49 percent. [.N]
Adding to the bullish mood was data showing U.S. consumer confidence
surged to a near 17-year high in November, while home prices rose
sharply in September, which should underpin consumer spending.
Euro zone government bond yields edged higher meanwhile as the first
instalments of German state inflation data pointed to another uptick for
Europe's largest economy, which should bolster the ECB's move to wind
down its stimulus. [GVD/EUR]
"In recent months we have seen core inflation dropping, and that has
been identified by the ECB as a key measure," said ING strategist Martin
It all helped the euro reassert its recent dominance over the dollar.
The euro climbed as far as $1.1882 <EUR=> and against a basket of
currencies the dollar at 93.241 <.DXY> and not far off a two-month
trough touched on Monday. [/FRX]
The dollar was stronger against the yen at 111.63 yen <JPY=> and away
from a 10-week low of 110.85, while the pound's jump on a trade-weighted
basis was 1.4 percent, its best since April. [GBP/]
That paled in comparison to bitcoin which flew to $10,200 <BTC=BTSP> on
BitStamp, a major trading platform based in Luxembourg.
The latest surge brought its gains for the year so far to over 950
percent, leaving more than a few observers baffled.
"The market is very illogical. There's no way to rationally value
bitcoin as an asset," said Thomas Glucksmann, head of marketing at Hong
Kong exchange Gatecoin.
"There's nothing that makes sense because there's no fundamentals behind
bitcoin. What people are buying into is the idea of how this technology
can be used in the future.
(Reporting by Marc Jones Additional reporting by Wayne Cole in Sydney
Editing by Jeremy Gaunt)
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