Asia exchanges up as Trump tax cut plan buoys markets

US President Donald Trump's long-awaited tax cut plans buoyed some Asia-Pacific exchanges Friday with Chinese trade data in focus, but a rise in the yen dragged Japan's benchmark index into the red.
AFP

Tokyo (AFP) – US President Donald Trump’s long-awaited tax cut plans buoyed most Asia-Pacific exchanges Friday, extending global gains, but a rise in the yen held back Japan’s benchmark index.

The broad rise from Shanghai to Sydney came on the back of Trump unveiling proposals that included cutting the corporate tax rate from 35 percent to 20 percent.

His market-friendly promise to reduce taxes, ramp up infrastructure spending and slash red tape helped drive a global rally in the months after his November election win.

But those gains fizzled as Trump’s legislative agenda suffered a series of blows and the White House has become embroiled in a host of crises.

Analysts took comfort from the fact that Trump has worked more closely with Republican congressional leaders on the tax issue than on the failed health care reform they attempted.

Still, the tax bill is expected to face a tough passage through Congress, with both sides of the aisle likely to question its affordability.

Mainland Chinese markets rose with Shanghai ending the day 0.3 percent higher, while South Korea’s benchmark index gained 0.9 percent, Hong Kong added 0.5 percent, and Taiwan tacked on 0.3 percent. Singapore fell 0.6 percent.

– ‘Abenomics’ under threat? –

In Japan, where the benchmark Nikkei 225 edged 0.03 percent lower by the close, investors were largely unmoved by broadly upbeat data, including better-than-expected factory output, as a stronger yen dented sentiment.

While the dollar was higher at 112.45 yen from 112.29 yen in New York, it was still down from 112.99 yen in Tokyo on Thursday.

A pick-up in Japan’s currency hits the profit outlook for major exporters, including automakers such as Toyota and Nissan, which hurts demand for their shares.

Meanwhile, Japanese Prime Minister Shinzo Abe got a boost from the latest data, including better-than-expected industrial production.

But he is facing an unexpected and formidable challenge in snap elections called for later this month from popular Tokyo governor Yuriko Koike, who stole Abe’s limelight with her newly launched “Party of Hope.”

“The weakness in the yen that supported Japanese stocks has slowed,” Hideyuki Ishiguro, a senior strategist at Daiwa Securities in Tokyo, told Bloomberg News.

“The reorganisation of opposition parties is threatening the optimism that the ruling coalition will gain an absolute stable majority in the election.

“There’s a possibility that the monetary easing under Abenomics will be shaken, which could deter investors from buying,” he added, referring to Abe’s flagship growth plan.

At the start in Europe, London’s FTSE 100 index was up almost 0.3 percent, the CAC 40 in Paris added 0.1 percent and Frankfurt’s DAX 30 rose 0.2 percent.

– Key figures around 0800 GMT –

Tokyo – Nikkei 225: DOWN 0.03 percent at 20,356.28 (close)

Hong Kong – Hang Seng: UP 0.5 percent at 27,554.30 (close)

Shanghai – Composite: UP 0.3 percent at 3,348.94 (close)

London – FTSE 100: UP 0.4 percent at 7,350.27

Euro/dollar: UP at $1.1803 from $1.1784 

Dollar/yen: UP at 112.42 yen from 112.29 yen

Pound/dollar: DOWN at $1.3417 from $1.3439 

Oil – West Texas Intermediate: UP five cents at $51.62 per barrel 

Oil – Brent North Sea: DOWN 12 cents at $57.51 per barrel

New York – DOW: UP 0.2 percent at 22,381.20 (close)

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