ASIA-PAC MID-SESSION UPDATE: US tax reform optimism buoys Asia stocks, but dampens EM currencies

Asia equity market begin the week mostly positive following Friday’s gains on Wall St. where tax reform optimism buoyed all major indices to record levels after reports Republican Senators Rubio and Corker were to support the final tax bill. ASX 200 (+0.7%) is higher with miners gaining after an early 6% surge in Dalian iron ore prices, while Nikkei 225 (+1.1%) outperforms on JPY weakness and after encouraging Japanese Trade Data in which Exports rose a 12th consecutive month. Elsewhere, Hang Seng (+0.5%) is positive and Shanghai Comp. (-0.1%) is indecisive after a significant CNY 300bln injection by the PBoC, and as some property names lag after the latest China Property Price data continued to show the effectiveness of government measures to cool the property sector.

Major FX pairs have been quiet so far with the greenback holding onto most of Friday’s advances which were spurred by the tax reform optimism. Nonetheless, most major currencies are attempting to nurse some of their losses with little success so far, although NZD/USD has gradually reclaimed the 0.7000 handle after an improvement in Performance of Services data. Elsewhere, GBP/USD is off worst levels but remains near last week’s lows despite Brexit talks moving on to the 2nd phase as EU’s Juncker also warned the next phase could be more difficult, while EM currencies have suffered against USD amid prospects of outflows from tax reforms and higher rates stateside.

Finally, 10yr JGBs are uneventful with prices flat as pressure from the heightened risk appetite in Japan is counterbalanced by a respectable Rinban announcement by the BoJ for nearly JPY 1tln of JGBs in 1yr-10yr maturities.

18 Dec 2017 - 02:55- Research Sheet- Source: RANsquawk

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