Trump tax cut, ECB
questions cool risk rally
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[April 27, 2017]
By Marc Jones
LONDON
(Reuters) - A record-setting rally in world stocks ran out of steam on
Thursday, with unconvincing U.S. tax cut plans cooling investors'
spirits and caution setting in as the European Central Bank met.
Europe's main bourses were as much as 0.7 percent lower as traders
pulled back after six days of unbroken gains fueled by relief at the
outcome of the first round of France's presidential election and
encouraging earnings and data. [.EU]
Wall Street was expected to barely budge when New York reopened [.N]
while Asia had been groggy too.
The Bank of Japan offered its most upbeat economic assessment in nine
years, but Asia-Pacific shares <.MIAPJ0000PUS> ended flat a day after
hitting their highest in almost two years.
A surprise move by Sweden's central bank to expand its stimulus program
pushed the crown <SEK=> down sharply, while the Canadian dollar <CAD=>
and Mexican peso <MXN=> held gains after the U.S. said it would not
scrap the North American Free Trade Agreement (NAFTA).
But the focus was turning to the ECB and what bank head Mario Draghi and
his colleagues have made of a recent upturn in euro zone economic data,
underscored while they met as the bloc's economic confidence rose to
near a 10-year high.
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As widely expected, the bank made no changes to its record low interest
rates or stimulus program, so the market reaction to the meeting may
hinge on a few crucial words at Draghi's 1230 GMT news conference.
"It is possible that the ECB will remove the language stating that the
risks (to the economy) remain tilted to the downside," said Mike Bell,
Global Market Strategist, JPMorgan Asset Management.
Euro zone government bond yields nudged up along with the euro which was
at $1.0913 <EUR=> having been as high as $1.0950 this week after pro-EU
centrist Emmanuel Macron topped the first round vote in France.
Disappointment lingered elsewhere though after Donald Trump's plans to
slash U.S. tax rates offered no concrete details on how they would be
paid for.
Billed beforehand as the biggest tax cut in history, they amounted to
little more than a one-page plan and fueled a suspicion that it could
run into opposition from U.S. lawmakers worried about increasing the
country's debt levels.
"There was virtually no new information, just as expected. He was
essentially repeating his campaign promises," said Tomoaki Shishido,
senior fixed income strategist at Nomura Securities.
DEUTSCHE DOWN
The dip in European shares saw them retreat from 20-month highs, with
banks, insurers and commodity-related stocks the main drag, although
gains in other cyclical industrials on the back of strong earnings kept
losses down. [.EU]
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People walk through the lobby of the London Stock Exchange in
London, Britain August 25, 2015. REUTERS/Suzanne Plunkett/File photo
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Deutsche Bank shares fell as much as 3.5 percent as a drop in its revenues
overshadowed a more than doubling of first-quarter net profits. Its shares have
nearly doubled though since last year's solvency worries.
Upbeat
results from SKF, Bayer and Subsea 7 - companies closely geared to economic
growth - were cheered as more investors piled into the European recovery story.
In emerging markets, the peso made the most ground but Turkey's lira was firing
too, hitting its highest since early January as a surprise policy tightening by
the country's central bank reassured investors about its resolve on inflation. [EMRG/FRX]
The S&P 500 ended down fractionally on Wednesday as the questions left by
Trump's tax plans overshadowed more upbeat earnings.
Weekly
U.S. jobless claims data and a report on durable goods are expected at 8:30 a.m.
ET and Microsoft, Amazon.com and Google parent Alphabet are scheduled to report
results after the bell.
Overall profits of S&P 500 companies are estimated to have risen 11.8 percent in
the first quarter, the most since 2011, according to Thomson Reuters I/B/E/S.
China's growth accelerated at the fastest pace since mid-2015 in the
January-March quarter, while South Korea on Thursday also reported stronger than
expected first-quarter growth, fueled by improving global demand.
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Among commodities, industrial metals steadied though oil prices dipped again on
concerns about globally bloated markets[O/R].
Brent futures <LCOc1> dropped to $51.23 per barrel, down 59 cents, or 1 percent,
from their last close. Brent is almost 9 percent below its April peak.
The dollar, meanwhile, clawed up to 111.34 yen <JPY=> but was still down from
near a one-month high of 111.78 yen scored on Wednesday.
(Additional reporting by Hideyuki Sano in Tokyo; editing by John Stonestreet)
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