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US stocks, dollar mixed as tax reform hits bump

Traders work on the floor of the New York Stock Exchange September 5, 2017. — Reuters picTraders work on the floor of the New York Stock Exchange September 5, 2017. — Reuters picLONDON, Oct 3 — US equities fluctuated near records, while the dollar’s rally stalled near a two-month high as investors assessed the prospects for tax reform after a Republican senator raised concern it could balloon the deficit.

The S&P 500 Index continued to trade near all-time highs along with other US gauges. The dollar retreated after touching the highest level since July and 10-year Treasury yields neared 2.34 per cent. Stocks in Europe fluctuated, shrugging off rallies in Asian markets where Japanese shares closed at their highest in more than two years and developing nation equities jumped. Oil fell toward US$50 a barrel.

Traders appear to be taking stock after the themes of tighter US monetary policy, a potentially more hawkish Federal Reserve chief and strong US PMI data helped to drive recent gains for both the dollar and equities. Goldman Sachs Group Inc analysts see the greenback as having room to run, thanks to solid growth prospects and the chance that Fed interest-rate hikes will prove more aggressive than market players currently anticipate.

Goldman sees the dollar rising particularly against the euro, which could be hurt by political concerns amid the Spanish woes over Catalonia and by elections in Austria and Italy in coming months.

Among the key events coming this week:

The UK’s Johnson, Davis, Rudd, Fox speak at the Conservative Party Conference. Investors will monitor progress toward forming coalition governments in Germany and New Zealand after elections last month left no party in either country with a majority. US data this week include trade, durable goods and Friday’s September non-farm payrolls report, which may have less predictive power than usual for the economic outlook due to likely distortions from hurricanes that hit from late August. The Reserve Bank of India on Wednesday is projected to keep benchmark rates unchanged. China is due to report monthly foreign-exchange reserves Thursday. Fed Chair Janet Yellen speaks at an event on Wednesday. Minutes of the last ECB meeting are the European economic highlight this week.

Here are the main moves in markets:

Stocks

The S&P 500 Index was little changed at 2,529.99 as of 9:46 a.m. New York time. The Stoxx Europe 600 Index dipped less than 0.05 per cent The MSCI All-Country World Index rose 0.1 per cent, reaching the highest on record. The UK’s FTSE 100 Index climbed 0.1 per cent, hitting the highest in almost eight weeks with its fifth consecutive advance. The MSCI Emerging Market Index jumped 0.8 per cent to the highest in more than a week.

Currencies

The Bloomberg Dollar Spot Index was steady after touching the highest in almost 11 weeks. The euro increased 0.1 per cent to US$1.1744. The British pound decreased 0.3 per cent to US$1.3236, the weakest in almost three weeks.

Bonds

The yield on 10-year Treasuries fell less than one basis point to 2.34 per cent. Germany’s 10-year yield gained two basis points to 0.47 per cent. Britain’s 10-year yield rose four basis points to 1.370 per cent.

Commodities

Gold was little changed at US$1,271.42 an ounce, the weakest in eight weeks. West Texas Intermediate crude declined 0.4 per cent to US$50.39 a barrel, the lowest in two weeks.

Asia

Japan’s Nikkei 225 Stocks Average jumped 1.1 per cent to the highest close since August 2015, while the Topix index added 0.7 per cent. The Hang Seng Index rose 2.3 per cent. India’s S&P BSE Sensex gauge rose 0.7 per cent as trading resumed after a three-day weekend, while markets in mainland China and South Korea remain shut. The Japanese yen fell 0.3 per cent to 113.08 per dollar, the weakest in almost 12 weeks. — Bloomberg

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