Asian Stocks Fluctuate as U.S. Tax Bill Awaited

Asian stocks were mixed at the start of the last month of 2017 and S&P 500 Index futures declined as the U.S. tax bill encountered stumbling blocks. The dollar headed for its first weekly gain in four weeks ahead of the tax vote.

Japanese shares trimmed an advance that briefly helped the Nikkei 225 Stock Average reclaim a 25-year high reached in November. Shares rose in Australia and swung between gains and losses in Hong Kong. Treasuries held a slide, with the 10-year yield breaking above 2.4 percent. The dollar came under pressure after the U.S. Senate suspended votes on the bill until Friday as it emerged a key compromise to help its passage collapsed.

The Dow Jones Industrial Average climbed past 24,000 after John McCain backed the Senate tax bill, and the S&P 500 Index capped its longest monthly winning streak since 2007 as technology stocks rebounded. McCain’s backing of the bill prompted optimism on its prospects as it’s headed for a marathon debate on the Senate floor. Senate Majority Leader Mitch McConnell said votes on the tax bill will resume at 11 a.m. on Friday as the collapse of a key compromise to win a majority for a Senate tax overhaul left Republicans scrambling to salvage the legislation.

Markets have become sensitive to any progress on U.S. tax reform that would give yet another impetus to an equity bull run into the final weeks of the year that has been fuelled by optimism on earnings and economic growth throughout 2017. It’s also raised concerns about stretched valuations and the sustainability of the equity rally. The MSCI Asia Pacific Index is poised for its biggest weekly decline this year.

Japan’s inflation sped up in October, though price rises are still less than half the central bank’s 2 percent target. In South Korea, inflation unexpectedly slowed to a one-year low and economic growth was slightly stronger than the central bank’s initial estimate. China’s Caixin manufacturing PMI slid to 50.8 from 51 in November.

Meanwhile, Washington politics has again been thrust into the spotlight amid a report that the White House is weighing replacing Secretary of State Rex Tillerson as his relationship with President Donald Trump sours.

Oil posted its longest streak of monthly gains since early 2016 after an OPEC-led coalition of major crude producers followed through on a long-awaited extension of supply cuts.

These are the main moves in markets:

Stocks

· The Topix index rose 0.3 percent at the close in Tokyo to advance for a second week. The Nikkei 225 Stock Average rose 0.4 percent after earlier jumping as much as 1.2 percent to touch the highest since 1992.

· Australia’s S&P/ASX 200 Index gained 0.3 percent. The Kospi index was up 0.1 percent.

· Hong Kong’s Hang Seng Index fluctuated. The Shanghai Composite Index declined 0.3 percent.

· Futures on the S&P 500 Index lost 0.3 percent. The underlying gauge rose 0.8 percent to a record at the close in New York.

The MSCI Asia Pacific Index was little changed.

Currencies

The Bloomberg Dollar Spot Index fell 0.1 percent.

· The yen gyrated early in Asia trading before trading flat at 112.57 per dollar.

The euro traded at $1.1915, up 0.2 percent.

· The British pound was at $1.3535, near the strongest in more than two months, after a 0.9 percent advance.

Bonds

The yield on 10-year Treasuries was steady at 2.40 percent.

· Australia’s 10-year bond yield advanced three basis points to 2.53 percent.

Commodities

West Texas Intermediate added 0.4 percent to $57.59 a barrel.

Gold was at $1,275.18 an ounce.

Source: Bloomberg

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